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Oceguera v. Cohen

March 24, 2009

THERESA OCEGUERA, PLAINTIFF AND RESPONDENT,
v.
DAVE COHEN ET AL., DEFENDANTS AND APPELLANTS.



APPEAL from a judgment of the Superior Court of Los Angeles County, Mark V. Mooney, Judge. Affirmed. (Los Angeles County Super. Ct. No. BC311437).

The opinion of the court was delivered by: Turner, P. J.

CERTIFIED FOR PUBLICATION

I. INTRODUCTION

Business and Professions Code*fn1 section 7031, subdivision (b) permits a consumer to sue an unlicensed contractor for a refund of moneys paid under a construction contract. Such a refund claim is subject to the defense the unlicensed contractor was in "substantial compliance" with the licensing requirement. The four elements of the substantial compliance defense of an unlicensed contractor to a consumer's refund claim are specified in section 7031, subdivision (e). In this case, we conclude substantial evidence supports the trial court's express and implied findings that defendants, L. A.'s Best Home Improvement, a general partnership (the partnership), David Cohen, and Yossi Grimberg, were unlicensed contractors who did not act in substantial compliance with the licensing requirement. We affirm the $32,500 judgment in favor of plaintiff, Theresa Oceguera, for the money she paid to defendants for construction work performed on her home.

II. BACKGROUND

This is the second appeal between the parties related to plaintiff's March 1, 2004 complaint against defendants for work performed on her home. In the first appeal, in an unpublished opinion, we affirmed a damages award in her favor for defective construction work. (Oceguera v. Cohen (Aug. 10, 2006, B186506) [nonpub. opn.].) We also reversed and remanded the matter for a limited retrial of two causes of action-for return of money pursuant to section 7031, subdivision (b) (second) and unfair competition in violation of section 17200 (sixth). (Id. at pp. 2, 17.) We concluded that the trial court had erred in summarily adjudicating the partnership was duly licensed at all times it performed the construction contract due to conflicting evidence as to when the qualifying or responsible managing employee, Arie Golan, disassociated himself from the partnership. That partnership had previously consisted of Mr. Golan, Mr. Cohen, and Mr. Grimberg. (Id. at pp. 14-16.) We further held, "[T]he existence of this controversy required defendants to produce a verified certificate of licensure pursuant to section 7031, subdivision (d)." (Id. at p. 14.)

The limited retrial reveals the following facts and circumstances. Prior to March 2003, the partnership engaged in the construction business with three partners, Mr. Golan, Mr. Cohen, and Mr. Grimberg. Mr. Golan was the licensed partner and the responsible managing employee. On May 4, 2003, Mr. Golan, the only licensed partner, executed a disassociation notice pursuant to section 7076, subdivision (c).*fn2 On May 6, 2003, the partnership filed a fictitious business name statement which listed Mr. Cohen and Mr. Grimberg as the only partners of the partnership.

The construction contract at issue was entered into on June 16, 2003. Work commenced the next day on June 17, 2003. Between June 17, 2003 and June 27, 2003, Ms. Oceguera paid the partnership $32,000 for construction work on her home. There were "quite a few" defects in the construction. Ms. Oceguera testified that she never saw Mr. Golan on the job site. Neither Mr. Cohen nor Mr. Grimberg was a licensed contractor between May 2003 and June 2003 when the construction work was performed at plaintiff's home.

Mr. Cohen and Mr. Grimberg gave conflicting testimony as to when Mr. Golan disassociated from the partnership. According to Mr. Grimberg, Mr. Golan no longer had any interest in the partnership after May 3, 2003. In contrast, Mr. Cohen testified that Mr. Golan continued to act as a partner "until the end of the month of July" 2003.

Defendants did not produce a verified certificate that any entity other than the partnership with Mr. Golan held a license prior to and during the times that construction work was performed on Ms. Oceguera's home. Rather, defendants' argue that they were not required to refund payments was predicated on the following theories: the partnership consisting of Mr. Golan, Mr. Cohen, and Mr. Grimberg held a license during the pertinent times; Mr. Golan did not officially disassociate himself from the former partnership until July 2003; and the current partnership substantially complied with licensing requirements sometime in July 2003.

In support of defendants' substantial compliance theory, Mr. Grimberg testified that he submitted documents to the State Contractor's License Board (the board) to change the qualifying or responsible managing officer in July 2003. Mr. Cohen testified that the partnership ultimately obtained a continuance from the board. The continuance was to allow the partnership to complete projects that had been commenced prior to Mr. Golan's disassociation. Mr. Grimberg testified Mr. Golan's disassociation notice was filed with the board on July 30, 2003. Thus, although Mr. Golan signed the notice of disassociation in May 2003, according to Mr. Grimberg, it was not submitted to the board until or around July 30, 2003.

Nevertheless, a document file-stamped by the California State Contractor's License Board ("the board") on July 15, 2003, entitled "Application for Replacing the Qualifying Individual" states that the exact date of Mr. Golan's disassociation was May 24, 2003. On August 7, 2003, an unsigned letter from Linda Loudon in the License Modification Unit of the board states the partnership's license was cancelled on May 24, 2003 due to Mr. Golan's disassociation. According to Ms. Loudon's letter, his disassociation caused "the automatic cancellation" of the license. Ms. Loudon's letter also stated the remaining partners were entitled to continue conducting business one year from the date of disassociation if a request for continuance was made in writing. In order to be effective, the continuance request would have to be filed with the registrar within 90 days of Mr. Golan's disassociation. The letter further provided that defendants could not contract for any additional projects while conducting business under a continuance. Defendants did not object to the consideration of Ms. Loudon's letter.

The trial court ruled plaintiff was entitled to a judgment on the second cause of action for return of money paid. The trial court ruled the unfair business practice claim was moot because both Mr. Cohen and Mr. Grimberg were licensed by the time of the trial. In rendering its decision, the trial court ruled: "I think this is obviously a case where we're talking about substantial compliance, not about whether or not there was a license in effect at the time. There was this retroactive cancellation of the license. [¶] But even if it had been retroactive, once the responsible managing employee ceases to function in that capacity, it's as if there is no license at all. [¶] Now, the evidence is somewhat conflicting as to Mr. Golan's position in the partnership. We do have the fictitious name statement filed in May of [2003]. We had the notice of disassociation . . . which states the date is May 4 of [2003]. We have Mr. Grimberg's testimony where he believed he was no longer involved as of May of [2003]. We also have plaintiff's testimony that she never saw Mr. Golan at the job site and no evidence from the defendant that he was ever there. The only evidence we have is Mr. Cohen's testimony regarding Mr. Golan being involved until July. [¶] I think, weighing the evidence, I don't think . . . defense has met their burden of proof in terms of Mr. Golan's involvement; therefore, it would appear that he was not involved as of May of [2003]. That being the case, it is as if there was no license at all the retroactive finding of the board. [¶] So then, I think we need to address whether or not there is substantial compliance, nevertheless. You know, I appreciate the fact that the defendants did everything they thought they should be doing in terms of trying to rectify the situation, that they were sending letters back and forth, that they ultimately did get their licenses, but I don't know I can get around, you know, the plain language of . . . [section 7031 subdivision (e)] where it says that the doctrine of substantial compliance shall not apply if the contractor has never been a duly licensed contractor in the state. I don't see a whole lot of wiggle room in that code section. I think it may, in fact, work something of an injustice, because your clients did do work. The quality of the work was the subject of another litigation, but be that as it may, I think the language of the statute controls, and I just don't see a way around it. [¶] And of course as recognized, there are other harsh results in terms of licensing requirements and their policy reasons for that. But nevertheless, I think I'm bound by the plain language of the statute to find in favor of plaintiff, in that the . . . doctrine of substantial compliance is not available where individuals were not licensed at the time of the act."

Defense counsel requested the trial court clarify whether its ruling interpreted the word "person" as used in section 7031, subdivision (e) to mean "individuals" who comprised the partnership. The trial court replied: "I should also indicate for the record that the certification of course is only presumptive evidence of licensure. So that is my interpretation, yes. And the two individuals that make up the partnership at the time ...


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