Opinion
F075487
10-11-2019
TROXLER & SONS CONSTRUCTION, Plaintiff, Cross-defendant and Appellant, v. E&B NATURAL RESOURCES MANAGEMENT CORPORATION et al., Defendants, Cross-complainants and Appellants.
Halling Meza, Chris W. Halling, Daniel S. Jonathan and Cameron M. Halling for Plaintiff, Cross-defendant and Appellant. John B. Linford, John B. Linford; Arrache & Potter, David B. Potter; Klein, Denatale, Goldner and Catherine E. Bennett for Defendants, Cross-complainants and Appellants.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. S1500CV283138)
OPINION
APPEAL from a judgment of the Superior Court of Kern County. Lorna H. Brumfield, Judge. Halling Meza, Chris W. Halling, Daniel S. Jonathan and Cameron M. Halling for Plaintiff, Cross-defendant and Appellant. John B. Linford, John B. Linford; Arrache & Potter, David B. Potter; Klein, Denatale, Goldner and Catherine E. Bennett for Defendants, Cross-complainants and Appellants.
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Plaintiff, cross-defendant and appellant, Troxler & Sons Construction (TASC), sued to recover payment for services it agreed to perform pursuant to a contract with defendant, cross-complainant and appellant, E&B Natural Resources Management Corporation (E&B). In the contract, TASC agreed to dewater and solidify drilling waste produced by E&B's oil well drilling and redrilling operations. E&B contended the contract was not valid, because it was signed by defendant, cross-complainant and appellant, Gary Bullard, who was not authorized to execute contracts on behalf of E&B. E&B also contended TASC could not recover on the contract because TASC lacked the necessary contractor's license for the work proposed. The trial court found the contract was valid, but because TASC lacked the proper contractor's license, it could not recover on the contract. TASC appeals the judgment, E&B and Bullard cross-appeal. We conclude the trial court was correct in determining TASC was not properly licensed for the work and affirm the judgment. Accordingly, we need not consider the merits of the cross-appeal.
FACTUAL AND PROCEDURAL BACKGROUND
In December 2013, E&B was drilling a sidetrack well, that is, it was redrilling an existing oil well, designated Wilcox No. 39. When an oil well is drilled or redrilled, it generates drilling mud or drilling waste. Sometime prior to December 2013, E&B learned that it would no longer be able to dispose of its drilling waste in the same manner as previously, so it was seeking alternative means of disposal.
On December 18, 2013, TASC brought its mobile rotary vacuum unit to E&B's oil field, near Wilcox No. 39, where the drilling waste from that well had been placed; it conducted a demonstration of its method of dewatering the drilling waste (i.e., separating waste solids from liquids) to prepare the waste for final disposal. On December 30 and 31, 2013, TASC returned with its rotary vacuum unit and processed more drilling waste; Bullard thought the process was too slow and asked TASC to use its other process to solidify the waste. On January 9 and 10, 2014, TASC brought different mobile equipment, a MetaFLO PDM unit, to the site; it was designed to solidify the drilling waste by adding a reagent that would absorb the water, after which the solidified waste could be hauled away or otherwise disposed of.
Sometime after the December 18, 2013 demonstration, Bullard signed a written agreement between TASC and E&B, entitled "Statement of Work." The Statement of Work (the contract) defined the scope of TASC's work to include supervision, labor, materials, equipment, and consumables for both of TASC's processes: dewatering and solidification. It provided for a two-year contract term.
Around January 13, 2014, TASC presented an invoice to Bullard, charging for the work performed on January 9, 2014. Bullard signed the invoice and it was subsequently paid. Representatives of E&B later met with TASC personnel and informed them that Bullard was not employed by E&B, but by a related corporation, Excalibur Well Services Corporation, and he was not authorized to sign contracts on behalf of E&B. E&B also informed TASC that it would no longer be using TASC's services, as offered in the contract, because they did not work satisfactorily.
TASC sued E&B for breach of the written contract, breach of the implied covenant of good faith and fair dealing, and promissory estoppel; it also sued both E&B and Bullard for negligent misrepresentation and declaratory relief. At trial, E&B asserted that TASC was not properly licensed under the Contractors' State License Law (Bus. & Prof. Code, §§ 7000-7191) to perform the work called for in the contract, and therefore TASC was statutorily barred from obtaining any compensation for that work. E&B also contended Bullard was not authorized to sign the contract on behalf of TASC, and therefore the contract was invalid.
All further references to statutes are to the Business and Professions Code, unless otherwise indicated.
After a court trial, the trial court expressly found that E&B ratified the contract signed by Bullard, and seemed to find that Bullard also had ostensible authority to sign on behalf of E&B. It concluded there was a valid contract between TASC and E&B. The trial court also found, however, that TASC did not hold the particular contractor's license necessary to carry out the work described in the contract. Therefore, TASC was barred by statute from recovering for any work under the contract. The trial court entered judgment in favor of defendants. TASC appeals, contending the work called for in the contract did not require a contractor's license. Defendants cross-appeal, arguing that, if this court concludes the trial court erred in finding TASC's work required a contractor's license, the judgment should nonetheless be upheld because substantial evidence does not support the finding that Bullard validly entered into the contract on behalf of E&B.
DISCUSSION
I. Standard of review
The interpretation of statutes and administrative regulations presents an issue of law for the court. (Spanish Speaking Citizens' Foundation, Inc. v. Low (2000) 85 Cal.App.4th 1179, 1214.) "The rules governing interpretation of statutes generally apply also to ... regulations." (Ibid.) The fundamental task in interpreting a statute or regulation is to ascertain the intent of the lawmakers in order to effectuate the purpose of the law. (Smith v. Superior Court (2006) 39 Cal.4th 77, 83.) In determining this intent, we look first to the language of the statute and give effect to its usual and ordinary meaning. (Ibid.) We construe the language in the context of the overall statutory and regulatory scheme of which it is a part. (Ibid.) "If the statutory terms are ambiguous, we may examine extrinsic sources, including the ostensible objects to be achieved and the legislative history. [Citation.] In such circumstances, we choose the construction that comports most closely with the Legislature's apparent intent, endeavoring to promote rather than defeat the statute's general purpose, and avoiding a construction that would lead to absurd consequences." (Ibid.)
We review findings of fact to determine whether they are supported by substantial evidence. (Donovan v. Poway Unified School Dist. (2008) 167 Cal.App.4th 567, 581-582.) " 'Substantial evidence' is evidence of ponderable legal significance, evidence that is reasonable, credible and of solid value." (Roddenberry v. Roddenberry (1996) 44 Cal.App.4th 634, 651.) "The focus is on the quality, rather than the quantity, of the evidence. 'Very little solid evidence may be "substantial," while a lot of extremely weak evidence might be "insubstantial." ' " (Ibid.)
II. Licensing
A. C-61 contractor's license
Generally, a person may not act as a contractor unless licensed under the Contractors' State License Law. (§ 7028.) Additionally, "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 ... without alleging that he or she was a duly licensed contractor." (§ 7031, subd. (a).) When proper licensure is controverted, the burden of proof to establish such licensure is on the licensee. (§ 7031, subd. (d).)
" 'Contractor,' for the purposes of [the Contractors' State License Law], is synonymous with 'builder' and ... is any person who undertakes to or offers to undertake to, or purports to have the capacity to undertake to, or submits a bid to, or does himself or herself or by or through others, construct, alter, repair, add to, subtract from, improve, move, wreck or demolish any building, highway, road, parking facility, railroad, excavation or other structure, project, development or improvement, or to do any part thereof, including ... the cleaning of grounds or structures in connection therewith, ... and whether or not the performance of work herein described involves the addition to, or fabrication into, any structure, project, development or improvement herein described of any material or article of merchandise." (§ 7026.) The scope of the tasks that section 7026 identifies is broad. (Phoenix Mechanical Pipeline, Inc. v. Space Exploration Technologies Corp. (2017) 12 Cal.App.5th 842, 852.)
"The purpose of the licensing law is to protect the public from incompetence and dishonesty in those who provide building and construction services. [Citation.] The licensing requirements provide minimal assurance that all persons offering such services in California have the requisite skill and character, understand applicable local laws and codes, and know the rudiments of administering a contracting business." (Hydrotech Systems, Ltd. v. Oasis Waterpark (1991) 52 Cal.3d 988, 995.) "Section 7031 advances this purpose by withholding judicial aid from those who seek compensation for unlicensed contract work. The obvious statutory intent is to discourage persons who have failed to comply with the licensing law from offering or providing their unlicensed services for pay. [¶] Because of the strength and clarity of this policy, it is well settled that section 7031 applies despite injustice to the unlicensed contractor. 'Section 7031 represents a legislative determination that the importance of deterring unlicensed persons from engaging in the contracting business outweighs any harshness between the parties, and that such deterrence can best be realized by denying violators the right to maintain any action for compensation in the courts of this state.' " (Hydrotech, at p. 995.)
Three classifications of contractors are established by statute: (1) general engineering contractors, (2) general building contractors, and (3) specialty contractors. (§ 7055.) "A general engineering contractor is a contractor whose principal contracting business is in connection with fixed works requiring specialized engineering knowledge and skill," including such items as waterways, dams, railroads, highways, airports, bridges, parks, and industrial plants. (§ 7056.) "[A] general building contractor is a contractor whose principal contracting business is in connection with any structure built, being built, or to be built, for the support, shelter, and enclosure of persons, animals, chattels, or movable property of any kind, requiring in its construction the use of at least two unrelated building trades or crafts, or to do or superintend the whole or any part thereof." (§ 7057, subd. (a).) TASC does not claim to hold a general engineering contractor's license. Although there was some evidence in the trial court that TASC held a general building contractor's license at the time it entered into the contract for which it sought compensation in this case, TASC does not contend in this appeal that the general building contractor's license authorized it to perform the subject work.
A specialty contractor is defined as: "a contractor whose operations involve the performance of construction work requiring special skill and whose principal contracting business involves the use of specialized building trades or crafts." (§ 7058, subd. (a).) The Contractors' State License Board (CSLB) is authorized to "make such rules and regulations as are reasonably necessary to carry out the provisions of [the Contractors' State License Law]. Such rules and regulations shall be adopted in accordance with the provisions of the Administrative Procedure Act." (§ 7008.) In particular, the CSLB "may adopt reasonably necessary rules and regulations to effect the classification of contractors in a manner consistent with established usage and procedure as found in the construction business, and may limit the field and scope of the operations of a licensed contractor to those in which he or she is classified and qualified to engage." (§ 7059, subd. (a).)
By regulation, the CSLB has classified general engineering contractors as Class A contractors and general building contractors as Class B contractors. (Cal. Code Regs., tit. 16, § 830(a).) Specialty contractors are subclassified within Class C, according to their particular trade; for example, a fencing contractor is within subclassification C-13, a swimming pool contractor is within subclassification C-53, and a water well drilling contractor is within subclassification C-57. (Cal. Code Regs., tit. 16, § 832.) A specialty contractor that does not fall within one of the expressly defined subclassifications (Cal. Code Regs., tit. 16, §§ 832.02-832.60) is a limited specialty contractor, within subclassification C-61 (Cal. Code Regs., tit. 16, § 832.61).
"Limited specialty is a specialty contractor classification limited to a field and scope of operations of specialty contracting for which an applicant is qualified other than any of the specialty contractor classifications listed and defined in this article." (Cal. Code Regs., tit. 16, § 832.61.)
B. Subcategory D-9 license
In this litigation, E&B contended that the work described in the contract required a C-61 limited specialty contractor's license, within the D-9 subcategory for a drilling, blasting and oil field work contractor. Because TASC admittedly did not hold such a license, E&B contended section 7031 prevented TASC from recovering any compensation for work under the parties' contract. TASC contended no contractor's license was required for its work.
At trial, E&B requested that the trial court take judicial notice of "January 27, 2016 determination of the California Contractors [sic] State License Board Classifications Deputy, Andrea Sisto regarding contractor's license classification." The document containing this "determination" was a copy of an email, from Sisto to an unidentified person, which defense counsel obtained by way of a request for documents under the California Public Records Act (Gov. Code, § 6250 et seq.) pertaining to the C-61 licensing subclassification, and the D-9 subcategory. In response to a question setting out facts very similar to those presented in this case, and asking for confirmation that a D-9 specialty license was not required, Sisto advised:
"The work described does require the D09 - Drilling, Blasting, and Oil Field Work. The work described would be considered 'other oil field related specialty work'.
"D-9 - Drilling, Blasting and Oil Field Work Contractor
"California Code of Regulations
"Title 16, Division 8, Article 3, Classifications
"A drilling contractor does core and post hole drilling, horizontal drilling (no piping) and drilling for placement of charges and performing blasting work; performs drilling for site dewatering, oil well drilling and other oil field related specialty work. (DOES NOT INCLUDE WATER WELL DRILLING)"
The trial court denied the request for judicial notice, observing it did not know what authority Sisto had, or whether her opinion represented the opinion of the CSLB.
Sisto testified at trial that she is employed by the CSLB as an Enforcement Representative 1, with the working title "classification deputy." She is the only classification deputy, and answers questions from the public statewide about the appropriate classification to perform particular work. She decides what classification of license is required, but her decision may be appealed to the board. Sisto testified the C-61 subclassification was established by a regulation adopted by the CSLB. The D subcategories of the C-61 subclassification come from CSLB rules. Sisto did not testify to the definition of the D-9 subcategory, nor did she opine whether the work described in the contract in issue would require a C-61, D-9 contractor's license, or any other type of contractor's license.
The trial court found the work described in the contract fell within the definition of the work of a contractor, as set out in section 7026. Although the trial court expressly denied E&B's request for judicial notice of the email from Sisto, which contained a description of the work a D-9 drilling contractor performs, it included virtually the same description in its statement of decision as the definition of a D-9 contractor, without any citation to the source of the definition. The statement of decision also included a list of D subcategories, preceded by the statement: "The Contractor's [sic] State License Board lists the C-61 classifications and its 'D' subcategories for administrative tracking. Definitions for the 'D' subcategories were developed by staff and approved by the Board." The trial court found that, to perform the work described in the contract, "plaintiff should have been licensed by the California State Contractor's [sic] License Board with a Classification C-61, subclassification D-09 state contractor's license."
C. Request for judicial notice
In this appeal, TASC argues that the D-9 subcategory was not a regulation with the force of law and, if it was, it did not encompass the work in issue. E&B requests that we take judicial notice of three "facts" that it contends support the conclusion that TASC was required to hold a C-61, D-9 contractor's license to perform the work in issue.
The first two purported facts of which E&B seeks judicial notice are: (1) that a D-9 license is a subcategory of a C-61 contractor's license and is defined in the same language set out in Sisto's email; and (2) that the D-9 subcategory "is a legitimate subclassification established by the Contractors [sic] State License Board for 'administrative tracking,' " and the definitions of the D subcategories were developed by staff and approved by CSLB as policy. E&B contends these matters may be judicially noticed as "[f]acts and propositions that are of such common knowledge within the territorial jurisdiction of the court that they cannot reasonably be the subject of dispute" (Evid. Code, § 452, subd. (g)) or "[f]acts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy" (Evid. Code, § 452, subd. (h)). In support of its request to take judicial notice of these purported facts, E&B cites the trial testimony of Sisto and a portion of the CSLB's website, which lists D subcategories of the subclassification C-61 contractor's license.
Like the trial court, an appellate court may take judicial notice of matters described in Evidence Code section 452. (Evid. Code, § 459; Ragland v. U.S. Bank National Assn. (2012) 209 Cal.App.4th 182, 193 (Ragland).) However, "[r]eviewing courts generally do not take judicial notice of evidence not presented to the trial court. Rather, normally 'when reviewing the correctness of a trial court's judgment, an appellate court will consider only matters which were part of the record at the time the judgment was entered.' " (Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 444, fn. 3.) Courts may deviate from this rule only in exceptional circumstances. (Ibid.)
E&B did not request or obtain judicial notice of either of these facts in the trial court. It has not explained that omission or presented any exceptional circumstances that would warrant this court taking judicial notice of them.
Further, the fact that information appears in the CSLB website does not make it a matter of common knowledge or a proposition that is "not reasonably subject to dispute and ... capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy." (Evid. Code, § 452, subd. (h).) In Duronslet v. Kamps (2012) 203 Cal.App.4th 717, the defendant requested that the appellate court "take judicial notice of general information on 'Nurse Practitioner Practice' apparently posted on the California Board of Registered Nursing Web site," citing Evidence Code section 452, subdivision (h). (Duronslet, at p. 737.) The court denied the request because, although the information was posted on the nursing board's website, it concluded the defendant had "not provided the court with information sufficient to show the information about nurse practitioners is 'not reasonably subject to dispute' and that it is 'capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.' " (Ibid.) The content of websites is also " 'plainly subject to interpretation and for that reason not subject to judicial notice.' " (Ragland, supra, 209 Cal.App.4th at p. 194.)
Section 7059, subdivision (a), authorizes the CSLB to "adopt reasonably necessary rules and regulations to effect the classification of contractors," but section 7008 requires those rules and regulations to be adopted in accordance with the Administrative Procedure Act (APA) (Gov. Code, § 11340 et seq.). Under the APA, " '[r]egulation' means every rule, regulation, order, or standard of general application ... adopted by any state agency to implement, interpret, or make specific the law enforced or administered by it, or to govern its procedure." (Gov. Code, § 11342.600.)
"The APA establishes the procedures by which state agencies may adopt regulations. The agency must give the public notice of its proposed regulatory action [citations]; issue a complete text of the proposed regulation with a statement of the reasons for it [citation]; give interested parties an opportunity to comment on the proposed regulation [citation]; respond in writing to public comments [citations]; and forward a file of all materials on which the agency relied in the regulatory process to the Office of Administrative Law [citation], which reviews the regulation for consistency with the law, clarity, and necessity [citations]. [¶] One purpose of the APA is to ensure that those persons or entities whom a regulation will affect have a voice in its creation [citation], as well as notice of the law's requirements so that they can conform their conduct accordingly [citation]." (Tidewater Marine Western, Inc. v. Bradshaw (1996) 14 Cal.4th 557, 568-569.) Properly adopted regulations are published in the California Code of Regulations. (Gov. Code, § 11344.)
The C-61 limited specialty contractor subclassification was established by regulation. (Cal. Code Regs., tit. 16, §§ 832, 832.61.) No party has challenged the validity of that regulation. The D subcategories of the C-61 subclassification, however, including the D-9 subcategory that is the subject of these requests for judicial notice, are not found in the California Code of Regulations. In the excerpts from the CSLB website that E&B cites in support of its request for judicial notice, the list of D subcategories is preceded by the statement: "The CSLB has listed the C-61 classifications into 'D' subcategories for administrative tracking. The definitions for the 'D' subcategories were developed by staff and approved by the Board as policy." Sisto initially testified that the D subcategories were part of the C-61 subclassification and were in the California Code of Regulations, but, on further questioning, stated that "[e]ach D classification is a board rule." Thus, the D subcategories are not classifications or subclassifications adopted pursuant to section 7059, section 7008, and the APA; they are merely policies developed by staff and approved by the CSLB without input from the public. Consequently, they are not enforceable regulations. (Gov. Code, § 11340.5, subd. (a).)
E&B also requests that we take judicial notice of fact (3): that "[i]n the context of the facts of this case, the CSLB would exercise its discretion such [as] to require a D-9 license." It bases this request on the email from Sisto to an unidentified recipient, in which Sisto opined that, given facts like the facts of this case, the work of dewatering and solidifying drilling waste would require a contractor's license because it would fall within the D-9 subcategory.
To the extent E&B seeks judicial notice of this purported fact on the ground it is not reasonably subject to dispute because it is a matter of common knowledge (Evid. Code, § 452, subd. (g)) or a fact capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy (Evid. Code, § 452, subd. (h)), E&B has failed to establish it falls within either category.
Although E&B requests judicial notice of this purported fact, rather than the email expressing Sisto's opinion, it also seems to argue that the email itself may be judicially noticed as an official act of an executive department of the state. (Evid. Code, § 452, subd. (c).) At trial, E&B requested judicial notice of the email, and the trial court denied the request. E&B has not argued or demonstrated that the trial court's ruling was incorrect. E&B has not demonstrated exceptional circumstances that would warrant deviation from the general rule that a reviewing court will consider only matters that were before the trial court and were part of the record at the time judgment was entered. (Vons Companies, Inc. v. Seabest Foods, Inc., supra, 14 Cal.4th at p. 444, fn. 3.)
Further, under the provision for judicial notice of official acts, we may take judicial notice of the fact the email was sent in response to a question from a member of the public, but we may not take judicial notice of the truth of its contents. (Mangini v. R.J. Reynolds Tobacco Co. (1994) 7 Cal.4th 1057, 1063, overruled on another ground in In re Tobacco Cases II (2007) 41 Cal.4th 1257, 1276; Ragland, supra, 209 Cal.App.4th at p. 193.) Further, the opinion expressed in the email is "a hearsay statement of opinion with respect to a matter of law" (Roy Brothers Drilling Co. v. Jones (1981) 123 Cal.App.3d 175, 185), which is an inappropriate matter for judicial notice. Also, Sisto testified that her decisions regarding what classification of license might be required in a particular case could be appealed to the CSLB. Consequently, we cannot conclude from the evidence presented that the opinion expressed by Sisto in her email conclusively establishes that the CSLB would determine TASC was required to hold a C-61, D-9 license for the work in issue. Because the content of the email is disputable, we decline to take judicial notice of purported fact (3), which E&B based on its content.
For all these reasons, we decline to take judicial notice of purported facts (1), (2), and (3).
D. Analysis
The issue before this court is whether TASC, in performing work under the contract, was acting as a contractor (§ 7026), requiring a contractor's license within the C-61 limited specialty contractor subclassification (§ 7058; Cal. Code Regs., tit. 16, §§ 832, 832.61). In its complaint, TASC alleged it was "a general contractor specializing in drilling waste management, dewatering of drilling fluids, solidification of drilling muds, and water treatment." In its first amended answer, E&B alleged TASC did not hold a contractor's license in the appropriate classification for the work. Because proper licensure was controverted, the burden of proving proper licensure was on TASC. (§ 7031, subd. (d).)
In the trial court, TASC attempted to prove that its Class B general building contractor's license covered the work, or that no contractor's license was required for the contract work. The trial court concluded TASC's work did not fall within the ambit of a Class B general building contractor license. It found, however, that "the work done by [TASC] at the E&B leasehold falls under the auspices of ... Section 7026," and a subclassification C-61 state contractor's license was required. In this appeal, TASC argues only that no contractor's license was required for the work.
The contract referred to TASC as "Contractor." The scope of work called for in the contract was described as:
"Contractor shall provide the Dewatering Services as follows:
"Supervision, Labor, Material, Equipment and Consumables for 1 each trailer mounted Rotary Vacuum Filter with filter media for filter drum operated in accordance with TASC Standard operating Procedures and 1 each trailer mounted Real Time Solidification PDM (PDM must operate as needed, 2 hrs. minimum per day)."
The testimony at trial indicated both drilling a new oil well and redrilling a sidetrack well used drilling fluids and produced drilling waste. Witnesses described how TASC proposed to process the drilling waste. Drilling waste would come out of the drilling rig and be pumped into half-round tanks. TASC would pump the more-liquid waste from the tanks into its rotary vacuum unit. The rotary vacuum unit would filter the solids out of the liquid. After cleaning, the liquid would be nonpotable water that might be reused in further drilling or disposed of otherwise. The more-solid waste, which would be difficult to run through the rotary vacuum unit, would be further solidified by adding a reagent using TASC's MetaFLO PDM unit. The processed solids would be put in a pit or bermed area, and later would be blended with earth or hauled to a disposal site, depending on the results of chemical testing. Under the contract, E&B was responsible for all testing, regulatory compliance, and disposal of the processed drilling waste.
The definition of the term "Contractor" includes: "any person who undertakes to or offers to undertake to, or purports to have the capacity to undertake to ... construct, alter, repair, add to, subtract from, improve, move, wreck or demolish any building, ... excavation or other structure, project, development or improvement, or to do any part thereof, including ... the cleaning of grounds or structures in connection therewith." (§ 7026.) TASC does not argue that drilling or redrilling of an oil well does not constitute construction, alteration, adding to, or improving a structure or excavation. The drilling waste was produced by the oil well drilling project. TASC participated in (i.e., did "any part thereof") the cleaning of the grounds or structures in connection with that project. E&B removed the waste from the drilling rig and deposited it in tanks for TASC; TASC processed it, using its rotary vacuum and MetaFLO PDM units. E&B then disposed of or reused the processed drilling waste. We conclude substantial evidence supports the trial court's conclusion TASC acted as a contractor within the definition set out in section 7026.
(See Bowline v. Gries (1950) 97 Cal.App.2d 741, 742-744, disapproved on another ground in Fraenkel v. Bank of America National Trust & Sav. Assn. (1953) 40 Cal.2d 845, 848 [holding that drilling a water well fell within section 7026 and required a contractor's license, and citing out of state cases that determined an oil well was a "structure"]; see also Cal. Code Regs., tit. 16, §§ 832, 832.57 [requiring a subclassification C-57 contractor's license for drilling and repairing water wells].)
TASC contends that, if it was a contractor within the section 7026 definition, it was not a specialty contractor requiring a Class C license. Contractors, however, fall within only three classifications: general engineering contractors, general building contractors, and specialty contractors. (§ 7055; Cal. Code Regs., tit. 16, § 830.) There was no contention in this case that TASC's work fell within the definition of a general engineering contractor. Although TASC held a Class B general building contractor's license and contended in the trial court that the Class B license covered the work in issue, TASC does not make that argument here. To fall within the general building contractor classification, a contractor's principal contracting business must be connected with "any structure built, being built, or to be built, for the support, shelter, and enclosure of persons, animals, chattels, or movable property of any kind." (§ 7057, subd. (a).) There was no showing TASC's drilling-waste-processing work involved any such structure.
If TASC's work was that of a contractor, it must have fallen within the third classification: specialty contractor. "A specialty contractor is a contractor whose operations involve the performance of construction work requiring special skill and whose principal contracting business involves the use of specialized building trades or crafts." (§ 7058, subd. (a).) TASC argues that it did not engage in "construction" work, and that the trial court so found.
We interpret the word "construction," as used in section 7058, to encompass the activities described in the definition of the term "contractor" (§ 7026). Thus, it includes altering, repairing, adding to, subtracting from, improving, moving, wrecking or demolishing any building, excavation or other structure, project, development or improvement, or doing any part of those activities, including cleaning grounds or structures in connection with those activities. This interpretation is consistent with the subclassifications of specialty contractors created by CSLB regulations.
The CSLB was charged with adopting regulations to effect the classification of contractors. (§ 7059.) Accordingly, it adopted subclassifications of the Class C specialty contractor's license. (Cal. Code Regs., tit. 16, § 832.) Those subclassifications include contractors performing work that might not be described traditionally as "construction," but would fall within the scope of the activities described in section 7026. For example, a subclassification C-21 building moving/demolition contractor's work includes demolishing, moving, and removing structures. (Cal. Code Regs., tit. 16, § 832.21.) The work of a subclassification C-22 asbestos abatement contractor includes removal and disposal of asbestos containing construction materials. (Cal. Code Regs., tit. 16, § 832.22, subd. (a).) The work of a subclassification C-57 well drilling contractor includes installing water wells "by boring, drilling, excavating, casing, cementing and cleaning to provide a supply of uncontaminated water." (Cal. Code Regs., tit. 16, § 832.57.)
TASC argues the trial court found its work was not "construction." The trial court rejected TASC's argument that its Class B general building contractor license covered the work in issue. It quoted section 7057 with emphasis as follows:
"Except as provided in this section, a general building contractor is a contractor whose principal contracting business is in connection with any structure built, being built, or to be built, for the support, shelter, and enclosure of persons, animals, chattels, or movable property of any kind, requiring in its construction the use of at least two unrelated building trades or crafts, or to do or superintend the whole or any part thereof." (§ 7057, subd. (a), underlining added by the trial court.)
The trial court quoted section 7057 in its entirety. We quote only the portion of subdivision (a) relevant to our discussion.
The trial court then concluded the trades described in section 7057 "must be involved in construction. There was no construction in the job that plaintiff performed.... [¶] Nothing about what plaintiff did falls under the ambit of general building contractor (Class B license)." TASC argues that, because the trial court found there was "no construction" in its work, it was not "a contractor whose operations involve the performance of construction work requiring special skill," and therefore it was not a specialty contractor as defined in section 7058, subdivision (a). (Italics added.)
The trial court's finding must be read in the context of its discussion. It was addressing the argument that TASC's work fell within the definition of work done by a Class B general building contractor, as set out in section 7057, subdivision (a). The trial court highlighted, in its quotation of that definition, the type of construction necessary for the Class B contractor's license. The highlighted portion required construction of a structure "for the support, shelter, and enclosure of persons, animals, chattels, or movable property of any kind." In the context of that definition, the trial court found the requisite construction was not present. We reject TASC's argument that, because the trial court found the construction necessary for a Class B general building contractor's license (§ 7057, subd. (a)) was not present, it was required to find the type of construction necessary for the Class C specialty contractor's license (§ 7058, subd. (a)) was also absent. The type of construction contemplated by the two sections is not the same.
TASC also argues that it was not acting as a contractor in performing the work described; rather, it was processing personal property (the drilling waste), which does not require a contractor's license. In support, it cites section 7046, which provides: "This chapter does not apply to any construction, alteration, improvement, or repair of personal property." TASC seeks to segregate its work from the oil well drilling activities by arguing the drilling waste, once removed from the drilling rig, was personal property that could have been transported and processed anywhere.
"This chapter" refers to the Contractors' State License Law. (See § 7000.) --------
The Contractors' State License Law does not define the term "personal property" as used in section 7046. "In construing a statute, our fundamental task is to ascertain the Legislature's intent so as to effectuate the purpose of the statute. [Citation.] We begin with the language of the statute, giving the words their usual and ordinary meaning. [Citation.] The language must be construed 'in the context of the statute as a whole and the overall statutory scheme ....' [Citation.] In other words, ' "we do not construe statutes in isolation, but rather read every statute 'with reference to the entire scheme of law of which it is part so that the whole may be harmonized and retain effectiveness.' " ' " (Smith v. Superior Court, supra, 39 Cal.4th at p. 83.) Thus, in interpreting the language of section 7046, we must consider it in the context of the Contractors' State License Law.
Section 7026, which defines the term " 'Contractor,' " provides that the "project" or "improvement" as a whole, and "any part thereof," constitutes work of a contractor for which a license is required. It also broadly includes "the cleaning of grounds or structures in connection therewith" as contractor work requiring a license. In Johnson v. Mattox (1968) 257 Cal.App.2d 714, which considered whether construction of the facilities for a baseball school constituted contractor work that required a license, the court recognized that section 7026 "leaves little building or construction activity outside its purview," adding that "it was the apparent intention of the Legislature in enacting the statute to cover the subject thoroughly so that its protective purposes could not easily be evaded." (Id. at p. 717.) The court rejected the argument of the alleged contractors that sections 7045 and 7046 exempted them from licensing. Those sections "in substance, permit unlicensed persons to recover for ' ... sale or installation of any finished products, materials or articles of merchandise, which do not become a fixed part of the structure,' or for the 'construction' or 'improvement' of 'personal property.' " (Id. at p. 718.) The court held those sections did not apply to installation of signs affixed to the ground in concrete or installation of a sprinkler system constructed of pipes laid underground. "Sections 7045 and 7046 were intended to apply to installations in which construction activity is merely incidental, such as the installation of kitchen appliances ...." (Ibid.)
TASC's dewatering and solidification services were closely connected with, and part of, E&B's oil well drilling and waste cleanup activities. Without the drilling activities, there would have been no drilling waste for TASC to process. The oil well drilling activities were not merely incidental to TASC's cleanup work. Although TASC supports its argument that the drilling waste was personal property by arguing the waste was removed from the drilling rig and could have been transported and processed anywhere, there was no evidence in the contract or witness testimony that the parties contemplated processing the drilling waste anywhere but in the immediate vicinity of the well drilling activity. Both of TASC's devices were mobile; they were mounted on a trailer or truck, so they could be transported to the drilling site when needed.
The cases cited by TASC for the proposition that items severed from the real property become personal property, involved issues of sale, ownership, or taxation of the property. (See Santa Clara Sand & Gravel Co. v. State Bd. of Equalization (1964) 225 Cal.App.2d 676; Stockel v. Elich, 112 Cal.App. 588; Richfield Oil Co. v. Hercules Gasoline Co., 112 Cal.App. 431; Schulenberg v. Harriman (1874) 88 U.S. 44.) None of them related to contracting or construction work. None of them considered the interplay between the definition of a contractor in section 7026 and the exemption found in section 7046.
Although for some purposes the drilling waste might be considered to be personal property severed from the realty, in the context of this case, processing it appears to fall within the provision of section 7026 expressly making "any part" of a project or improvement, and "the cleaning of grounds ... in connection therewith," functions of a contractor that require licensing. Generally, the anticipated methods of disposal of the drilling waste included separating solids from liquids and (1) reusing some of the liquids in the drilling project, (2) blending the nonhazardous solids with the soil on site, or (3) transporting hazardous waste to an appropriate disposal site. The drilling waste was generated by the drilling activity, and processing and disposal of the waste was part of the well drilling project or its clean up. The waste was not removed from the oil field but was stored in tanks or sumps near the well for processing and disposal. TASC's work was part of the process of preparing the drilling waste for reuse or disposal. Consequently, its work appears to fall within the provision of section 7026 defining the work of a contractor to include "any part" of the construction project, or "the cleaning of grounds or structures in connection therewith," and not within the exemption for construction or alteration of personal property set out in section 7046.
We must construe these statutes so as to effectuate their purpose. "The purpose of the licensing law is to protect the public from incompetence and dishonesty in those who provide building and construction services. [Citation.] The licensing requirements provide minimal assurance that all persons offering such services in California have the requisite skill and character, understand applicable local laws and codes, and know the rudiments of administering a contracting business." (Hydrotech Systems, Ltd. v. Oasis Waterpark, supra, 52 Cal.3d at p. 995.) The Legislature intended that the Contractors' State License Law be interpreted broadly, so that contractors could not easily evade its protective purposes. (Viking Pools v. Maloney (1989) 48 Cal.3d 602, 607.) Consistent with those protective purposes, we give the exemption found in section 7046 a narrow interpretation. While it may apply to activities like delivery, installation, and repair of personal property items, such as kitchen appliances, even when the delivery, installation, or repair takes place at a construction site, we conclude it does not apply to the dewatering and solidification of E&B's drilling waste performed by TASC. TASC's services were performed as an integral part of E&B's well drilling project or its cleanup, and were the type of services intended to be included within the licensing requirement of section 7026. They were not the type of services intended to be included within the exemption set out in section 7046.
The trial court correctly concluded TASC's services were contractor services, as defined in section 7026, and the appropriate contractor's license was the C-61 specialty contractor's license. It was undisputed that TASC did not hold such a license. Accordingly, as the trial court found, TASC was barred by section 7031, subdivision (a) from recovering for the work it contracted to perform pursuant to the contract.
III. Validity of Contract
Because we have determined the trial court correctly concluded TASC was not entitled to recover on the contract because it lacked the necessary contractor's license and the judgment should be affirmed, E&B's protective cross-appeal challenging the validity of the execution of the contract on E&B's behalf is moot. We dismiss it without reaching the merits. (See Hewlett v. Squaw Valley Ski Corp. (1997) 54 Cal.App.4th 499, 546 [dismissing protective cross-appeal as moot upon affirmance in opposing party's appeal].)
DISPOSITION
The judgment is affirmed. The cross-appeal is dismissed as moot. E&B and Bullard are entitled to their costs on appeal.
/s/_________
HILL, P.J. WE CONCUR: /s/_________
FRANSON, J. /s/_________
SMITH, J.