Filed 7/16/20; Modified and certified for publication 8/7/20 (order attached)




IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                       SECOND APPELLATE DISTRICT

                                      DIVISION SIX


 C. W. JOHNSON & SONS,                                    2d Civ. No. B300187
 INC.,                                                  (Super. Ct. No. 56-2018-
                                                        00517254-CU-BC-VTA)
   Cross-complainant and                                   (Ventura County)
 Appellant,

 v.

 RANDALL M. CARPENTER,

   Cross-defendant and
 Respondent.



      The trial court sustained without leave to amend a
demurrer to a building contractor’s second amended
cross-complaint for breach of contract and quantum meruit. The
court sustained the demurrer on the ground that the contractor
was not licensed during part of the contract. (Bus. & Prof. Code,1


       All statutory references are to the Business and
         1

Professions Code unless otherwise stated.
§ 7031, subd. (a).) The contractor appeals the ensuing judgment.
We reverse and overrule the demurrer. The contractor is entitled
to an evidentiary hearing on whether it substantially complied
with contractor licensing law. (Id. at subd. (e).)
                               FACTS
       C. W. Johnson & Sons, Inc. (Johnson) agreed to install
flooring in Randall Carpenter’s house for a total price of $68,343.
Carpenter deposited 50% of the total ($34,171.50) with the
balance to be paid on completion. All did not go well.
       Carpenter sued Johnson alleging causes of action for
breach of contract, disgorgement of money paid to an unlicensed
contractor, fraud, and unfair business practices. Johnson
answered and cross-complained for the balance of the contract
price, alleging breach of contract and quantum meruit.
       Carpenter demurred to the second amended
cross-complaint on the ground that Johnson did not allege it was
a licensed contractor. Johnson opposed the demurrer on the
ground it was licensed during the period for which it is seeking
compensation, or, at least, it is entitled to a hearing on whether it
substantially complied with the contractor’s licensing law.
                 Second Amended Cross-complaint
       Johnson’s second amended cross-complaint alleged as
follows:
       The parties entered into the contract on March 25, 2016.
Between March 2016 and September 2016, Johnson performed
work under the contract, including the original installation of the
flooring. Work performed after September 2016 consisted of
warranty, repair, and corrective work. At all times during the
original installation, Johnson was a duly licensed contractor.




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Johnson is only seeking money due and owing during the period
it was a duly licensed contractor.
       Charles Johnson (Charles) has been an officer of Johnson
since at least 2014 and has actively participated in its business
activities. Charles believed he was registered with the
Contractor’s State Licensing Board (CSLB) as Johnson’s
Responsible Managing Officer (RMO). In fact, Charles’s father
was registered as the RMO. Charles’s father died on September
21, 2016. Until August 2018, Charles did not know or have
reason to know that his father was registered as the RMO.
       In August 2018, when Charles learned he was not
Johnson’s RMO, he applied to the CSLB to replace his father as
the RMO. The application was approved in October 2018.
       Johnson has performed all of the terms of the contract and
has done so in a workmanlike manner.
                            DISCUSSION
                                   I.
       The function of a demurrer is to test whether, as a matter
of law, the facts alleged in the complaint state a cause of action
under any legal theory. (Intengan v. BAC Home Loans Servicing,
LP (2013) 214 Cal.App.4th 1047, 1052.) We assume the truth of
all facts properly pleaded, as well as facts of which the trial court
properly took judicial notice. (Ibid.) But we do not assume the
truth of contentions, deductions, or conclusions of law. (Ibid.)
Our review of the trial court’s decision is de novo. (Ibid.)
                                  II.
                   Work Performed While Licensed
       Section 7031, subdivision (a) provides in part: “(a) Except
as provided in subdivision (e), no person engaged in the business
or acting in the capacity of a contractor, may bring or maintain




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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 . . . .”
       Johnson’s cross-complaint alleges that it was duly licensed
until September 2016, when the RMO, Charles’s father, died.
When the RMO dies or otherwise disassociates from the licensee,
the licensee must replace the RMO within 90 days (§ 7068.2,
subd. (a).) Failure to do so automatically suspends the license.
(§ 7068.2, subd. (c).)
       Johnson’s cross-complaint alleges that by September 2016,
it had performed the original flooring installation and all work
performed thereafter consisted only of warranty, repair, and
corrective work. Johnson alleges it is seeking compensation only
for work performed during the period it was duly licensed.
       But Johnson alleges only a single contract. Thus,
warranty, repair, and corrective work were performed under the
contract at a time when Johnson was not licensed. Johnson
cannot divide a single contract into segments and claim
compensation for work performed during the segment for which it
was licensed. (MW Erectors, Inc. v. Niederhauser Ornamental &
Metal Works Co., Inc. (2005) 36 Cal.4th 412, 425-426.)
                                   III.
                 Good Faith Substantial Compliance
       Section 7031, subdivision (e) states an exception to the
license requirement of subdivision (a). Subdivision (e) provides in
part: “[T]he court may determine that there has been substantial




                                4
compliance with licensure requirements under this section if it is
shown at an evidentiary hearing that the person who engaged in
the business or acted in the capacity of a contractor (1) had been
duly licensed as a contractor in this state prior to the
performance of the act or contract, (2) acted reasonably and in
good faith to maintain proper licensure, and (3) acted promptly
and in good faith to remedy the failure to comply with the
licensure requirements upon learning of the failure.”
       The plaintiff is required to plead only ultimate facts, not
evidentiary facts. (Doe v. City of Los Angeles (2007) 42 Cal.4th
531, 550.) Here Johnson alleged that it was a duly licensed
contractor prior to and during part of the performance of the
contract; that Charles reasonably did not know or have reason to
know that he was not the RMO at the time of his father’s death;
that as soon as he learned he was not the RMO, he applied to be
so designated; and the CSLB granted the application shortly
thereafter. That is a sufficient allegation of ultimate facts. It
advises Carpenter of the basis for Johnson’s claim of substantial
compliance. (See Perkins v. Superior Court (1981) 117 Cal.App.3d
1, 6 [complaint needs only sufficient facts to apprise defendant of
the basis on which plaintiff is seeking relief].)
       Carpenter cites Pacific Caisson & Shoring, Inc. v. Bernards
Bros., Inc. (2015) 236 Cal.App.4th 1246, 1257 (Pacific Caisson)
for the proposition that “acted reasonably and in good faith to
maintain proper licensure” as required for relief under
subdivision (e) pertains to conduct prior to a license’s suspension.
       In Pacific Caisson, the trial court determined after an
evidentiary hearing that the contractor knew or should have
known of the deficiency prior to its license being suspended, but
did not cure the deficiency until after its license was suspended.




                                 5
The Court of Appeal affirmed the trial court’s determination that
the contractor was not entitled to relief under section 7031,
subdivision (e).
      Here Johnson pleaded that Charles did not know or have
reason to know prior to being notified of the suspension that he
was not Johnson’s RMO. That qualifies as acting reasonably and
in good faith prior to the license’s suspension.
      Johnson is entitled to a hearing pursuant to section 7031,
subdivision (e). Nothing in this opinion should be construed as
indicating how the trial court should decide the matter.
                            DISPOSITION
      The judgment is reversed. Costs on appeal are awarded to
appellant.




                                    GILBERT, P. J.


We concur:



             YEGAN, J.



             TANGEMAN, J.




                                6
                   Jeffrey G. Bennett, Judge

               Superior Court County of Ventura

                ______________________________

      Law Office of Daniel Friedlander and Daniel Friedlander
for Cross-complainant and Appellant.
      Law Office of Robert Stubblefield and Robert Stubblefield
for Cross-defendant and Respondent.
Filed 8/7/20

               CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                SECOND APPELLATE DISTRICT

                          DIVISION SIX


 C. W. JOHNSON & SONS,                   2d Civ. No. B300187
 INC.,                                 (Super. Ct. No. 56-2018-
                                       00517254-CU-BC-VTA)
   Cross-complainant and                  (Ventura County)
 Appellant,
                                         ORDER MODIFYING
 v.                                        OPINION AND
                                        CERTIFYING OPINION
 RANDALL M. CARPENTER,                   FOR PUBLICATION
                                          [NO CHANGE IN
   Cross-defendant and                      JUDGMENT]
 Respondent.



THE COURT:
       It is ordered that the opinion filed herein on July 16, 2020
be modified as follows:
       On page 1, the following paragraph is inserted as the first
full paragraph:
              A contractor performs work but is not properly
       licensed. Here we conclude there are circumstances under
       which the contractor may have a cause of action for work
       performed.
      There is no change in the judgment.
      The opinion in the above-entitled matter filed on July 16,
2020, was not certified for publication in the Official Reports. For
good cause it now appears that the opinion should be published in
the Official Reports and it is so ordered.




________________________________________________________________________
GILBERT, P. J.               YEGAN, J.              TANGEMAN, J.




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