Filed 5/18/15; Received for posting 5/19/15; reposted to correct filing description; no change in text

                                  CERTIFIED FOR PUBLICATION

              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                   SECOND APPELLATE DISTRICT

                                              DIVISION THREE


PACIFIC CAISSON & SHORING, INC.,                                 B248320

      Plaintiff, Cross-defendant and                             (Los Angeles County
Appellant,                                                       Super. Ct. No. BC343834)

         v.

BERNARDS BROS. INC.,

      Defendant, Cross-complainant and
Respondent.




         APPEAL from a judgment of the Superior Court of Los Angeles County, Steven J.
Kleifield, Judge. Affirmed.
         Law Offices of Arthur Jarvis Cohen and Arthur Jarvis Cohen for Plaintiff, Cross-
defendant and Appellant.
         Law Offices of Ted R. Gropman and Ted R. Gropman for Defendant, Cross-
complainant and Respondent.
                                           _________________________
                                     INTRODUCTION
       The Contractors’ State License Board (the Board) suspended the license of Pacific
Caisson & Shoring, Inc. (Pacific) as the sanction for the failure to notify the Board that a
judgment had been entered against Pacific. (Bus. & Prof. Code, § 7071.17.)1 Thereafter,
the trial court found that Pacific did not substantially comply with the requirement that
the contractor be licensed while performing work. (§ 7031, subd. (e).) Pacific appeals
contending that the judgment was not “substantially related” to its “construction
activities” within the meaning of section 7071.17, and so Pacific’s license should not
have been suspended. We hold that the judgment falls within the ambit of section
7071.17, and affirm the judgment against Pacific.
                   FACTUAL AND PROCEDURAL BACKGROUND
       1. The previous trial involving these parties
       Much of the factual predicate is set forth in our earlier published opinion,
Pacific Caisson & Shoring, Inc. v. Bernards Bros. Inc. (2011) 198 Cal.App.4th 681
(Pacific Caisson). Pacific entered into a subcontract (the subcontract) with Bernards
Bros. Inc. (Bernards) to provide temporary excavation and support work on a project to
build a medical center for the County of Ventura. (Id. at p. 685.)
       Pacific filed this lawsuit against Bernards for compensation for work performed.
Bernards raised as an affirmative defense that Pacific was not “at all times” properly
licensed, and cross-complained seeking reimbursement for money owed. (Pacific
Caisson, supra, 198 Cal.App.4th at pp. 686-687.) The prime contract required the
subcontractor to maintain a Class C-12 specialty earthwork and paving contractor’s
license. Pacific held Class A and Class B contractor’s licenses but never obtained a
Class C-12 specialty license. (Id. at p. 686.)
       We reversed the judgment in favor of Bernards. We held that Pacific was “duly
licensed” (§ 7031, subd. (a)) in the sense that its Class A license sufficed. (Pacific
Caisson, supra, 198 Cal.App.4th at p. 685.) However, because that Class A license was

1
       All further statutory references are to the Business and Professions Code.

                                                 2
suspended for a two-month period, Pacific was not licensed “at all times” during
performance of the subcontract and so we remanded the case for trial on whether Pacific
nonetheless substantially complied with the licensing requirement pursuant to section
7031, subdivision (e) so as to be entitled to recover from Bernards despite the lapse in
licensure. (Pacific Caisson, supra, at pp. 693 & 696.)
       2. Trial on remand
       The following was adduced on retrial. Pacific commenced work under the
subcontract on April 3, 2002 and finished on October 28, 2003. While Pacific was
performing under the subcontract, the Board suspended Pacific’s license on April 1,
2003. The suspension was lifted after 77 days.
       The facts giving rise to the suspension are undisputed. Jerry McDaniel and his
wife Delma2 own two corporations, Pacific and Gold Coast Drilling, Inc. Formed in
1989, Gold Coast rents equipment to Pacific and other companies. Gold Coast is a
“union shop” that also does “union jobs” for Pacific. Jerry is the Responsible Managing
Officer (RMO) and the sole qualifier for both companies’ licenses, meaning his
knowledge and experience meet the prerequisites for the licenses for Pacific and Gold
Coast. (§ 7068, subds. (a) & (b)(3).) Delma performs all of the administrative tasks and
maintains the companies’ licenses.
       Gold Coast was sued by American Benefit Plan Administrators, Inc. (ABPA),3 the
agent and fiduciary for Gold Coast’s union’s pension, to recover employee benefits Gold
Coast owed under its collective bargaining agreement. The lawsuit was resolved by a

2
       For clarity, we refer to the McDaniels by their first names and mean no disrespect
thereby.
3
       ABPA is the administrator, agent, and fiduciary for the Laborers Health and
Welfare Trust Fund for Southern California; Construction Laborers Pension Trust for
Southern California; Construction Laborers Vacation Trust for Southern California;
Construction Laborers Vacation Trust for Southern California; Laborers Training and Re-
Training Trust Fund for Southern California; Fund for Construction Industry
Advancement; Center for Contract Compliance; and Laborers Contract Administration
Trust Fund for Southern California.

                                             3
stipulated judgment entered on June 20, 2000, under which Gold Coast agreed to pay a
discounted sum on a monthly basis and to remain current on its regular employee benefit
contributions (the stipulated judgment). As President of Gold Coast, Delma signed the
stipulated judgment and informed Jerry.
       After making the September 2001 installment, Gold Coast made no more
payments. Gold Coast learned it was in default under the stipulated judgment in
December 2001. In February 2002, ABPA notified Gold Coast that it would begin
collecting the full amount under the stipulated judgment’s acceleration clause. Gold
Coast did not dispute the amount owed but, as it lacked the funds, it made no further
payments.
       On March 26, 2003, approximately 11 months after Pacific commenced work on
the subcontract with Bernards, and over two years after the stipulated judgment was
entered, ABPA notified the Board of the unsatisfied stipulated judgment.
       On April 3, 2003, the Board wrote to Gold Coast stating it was “notified that there
is a construction related judgment against you.” The letter explained, because Gold
Coast failed to notify the Board within 90 days of the date of the judgment, that its
license would automatically be suspended effective April 1, 2003 under section 7071.17.
The Board also suspended Pacific’s license as an associated license of Gold Coast.
(§ 7071.17, former subd. (j).)4
       Upon receiving the suspension notice, Jerry contacted his attorney who negotiated
a resolution with ABPA. On June 6, 2003, Gold Coast and ABPA entered into a
stipulation under which Gold Coast agreed to pay a full satisfaction of the judgment by
November 30, 2003. The Board lifted the suspension of both licenses on June 17, 2003,
after receiving the ABPA’s notice of the settlement.
4
       Under subdivision (j) of section 7071.17, the Board is required to suspend the
license of any licensee who shares qualifying personnel with a judgment debtor licensee
who has not satisfied a final judgment, until the judgment debtor’s license is reinstated or
the qualified person disassociates him or herself from the suspended licensed entity.
       Since 2003, subdivision (j) has been amended. None of the amendments is
relevant to this appeal.

                                             4
       3. The trial court’s ruling
       On this evidence, the trial court ruled that Pacific did not qualify for the
substantial compliance exception because it failed to demonstrate, under the second
prong of the exception, that it “acted reasonably and in good faith to maintain proper
licensure.” (§ 7031, subd. (e).) The court reasoned that Jerry, as RMO for both
companies, was responsible for assuring full compliance with the laws concerning
construction operations. Section 7071.17, subdivision (b) obligated Gold Coast to report
the unsatisfied stipulated judgment within 90 days. The licenses’ suspensions were
caused by the McDaniels’ failure to notify the Board of Gold Coast’s unsatisfied
stipulated judgment. The court found that the reason the McDaniels failed to report the
unsatisfied stipulated judgment to the Board was either because they knew that the
licenses would be suspended or because of an ignorance of the law. The court found the
first explanation was not in good faith and the second was not reasonable given the
McDaniels’ long experience in the contracting business. Judgment was entered awarding
$206,437.91 plus costs to Bernards on its cross-complaint. Pacific timely appealed.
                                        DISCUSSION
       Section 7031 precludes a contractor from maintaining any action to recover
compensation for the performance of work requiring a license unless it was “a duly
licensed contractor at all times during the performance of that” work. (§ 7031, subd. (a).)
       Despite this broad forfeiture rule, contractors may nonetheless recover
compensation by establishing that they substantially complied with this licensing
requirement in accordance with subdivision (e) of section 7031. To bring itself within
this exception, a contractor must show at an evidentiary hearing, despite being unlicensed
at some time during performance, that the contractor, “(1) had been duly
licensed . . . prior to . . . performance . . . (2) acted reasonably and in good faith to
maintain proper licensure, (3) did not know or reasonably should not have known that he
or she was not duly licensed when performance of the act or contract commenced, and
(4) acted promptly and in good faith to reinstate his or her license upon learning it was


                                                5
invalid.” (§ 7031, subd. (e); Pacific Caisson, supra, 198 Cal.App.4th at pp. 694-696.)5
As the exception is stated in the conjunctive, “the contractor seeking payment must
demonstrate it satisfied all of the statutory elements to be entitled to recovery.”
(Pacific Caisson, supra, at p. 694.)
       While application of the substantial compliance exception is a question of fact
(§ 7031, subd. (e); ICF Kaiser Engineers, Inc. v. Superior Court (1999) 75 Cal.App.4th
226, 236), “[c]onstruction of a statute is a question of law which appellate courts review
de novo” (City of Carson v. City of La Mirada (2004) 125 Cal.App.4th 532, 540). The
trial court found that Pacific did not comply with the second prong of the substantial
compliance exception because Pacific did not “act[] reasonably and in good faith to
maintain proper licensure.” (§ 7031, subd. (e).)
       1. Gold Coast was obligated to notify the Board of the unsatisfied stipulated
judgment.
       The RMO is responsible for securing compliance with the licensing laws and the
rules and regulations of the Board. (§ 7068.1.) Among the many acts necessary to

5
        At the time of the relevant acts and omissions in this case, the substantial
compliance exception read: “The judicial doctrine of substantial compliance shall not
apply under this section where the person who engaged in the business or acted in the
capacity of a contractor has never been a duly licensed contractor in this state. However,
the court may determine that there has been substantial 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) did
not know or reasonably should not have known that he or she was not duly licensed.
Subdivision (b) of Section 143 does not apply to contractors subject to this subdivision.”
(§ 7031, former subd. (e).)
        The Legislature amended section 7031, subdivision (e) in 2003, effective
January 1, 2004, by among other things, adding the fourth prong. (Pacific Caisson,
supra, 198 Cal.App.4th at pp. 694-695, citing MW Erectors, Inc. v. Niederhauser
Ornamental & Metal Works Co., Inc. (2005) 36 Cal.4th 412, 434, citing Stats. 2003,
ch. 289, § 1.) However, as we explained in our first opinion, “ ‘the amendment merely
clarified, and did not change, existing law.’ [Citation.]” (Pacific Caisson, supra, at
p. 695, italics added.)

                                              6
maintain licensure, is alerting the Board to any qualifying unsatisfied judgments imposed
on the licensee. (§ 7071.17, former subd. (b).)6 The failure to notify the Board within
90 days of the judgment results in an automatic suspension of the license. (Ibid.) Even if
a contractor informs the Board of a judgment, it must still file a bond with the Board
sufficient to guarantee payment of all unsatisfied judgments, “as a condition to the
continual maintenance of the license.” (Ibid.) The automatic suspension of Gold Coast’s
license caused the suspension of Pacific’s license because Jerry is the RMO qualifying
for both companies’ licenses. (Id., subd. (j).)
       Pacific challenges the applicability of section 7071.17 to this case.
       a. The stipulated judgment was the type of judgment contemplated by section
7071.17.
       Pacific does not dispute that Gold Coast failed to notify the Board of the June
2000 stipulated judgment. Instead, Pacific contends that the stipulated judgment was not
the type of judgment contemplated in section 7071.17.
       Subdivision (a) of section 7071.17 lists the unsatisfied final judgments that fall
within the statute’s ambit. They are judgments against the contractor for the refusal or
failure “to pay a contractor, subcontractor, consumer, materials supplier, or employee.”

6
        Section 7071.17, former subdivision (b), in effect from 1998 through 2003,
read: “the licensee shall notify the registrar in writing of any entered and unsatisfied
judgments within 90 days from the date of judgment. If the licensee fails to notify the
registrar in writing within 90 days, the license shall be automatically suspended on the
date that the registrar is informed, or is made aware of the unsatisfied judgment. The
suspension shall not be removed until proof of satisfaction of judgment, or in lieu thereof,
a notarized copy of an accord is submitted to the registrar. If the licensee notifies the
registrar in writing within 90 days of the date of judgment of any entered and unsatisfied
judgments, the board shall require as a condition to the continual maintenance of the
license that the licensee file or have on file with the board a judgment bond sufficient to
guarantee payment of an amount equal to the unsatisfied judgment or judgments. The
licensee has 90 days from date of notification by the board to file the bond or at the end
of the 90 days the license shall be automatically suspended. The licensee may provide
the board with a notarized copy of any accord, reached with any individual holding an
unsatisfied final judgment, to satisfy a debt in lieu of filing the bond.” (Italics added.)
        None of the subsequent amendments to this statute is relevant to this appeal.

                                              7
(§ 7071.17, subd. (a), italics added.) Pacific contends that the stipulated judgment was
not a judgment for the failure “to pay employees for any work performed.” Yet, section
7071.17, subdivision (a) is not limited to judgments for back pay. The payment of
employee wages is a condition of a contractor’s license. (§ 7071.5, former subd. (c)
[requiring contractor’s bond “for the benefit of,” among others, any “employee of the
licensee damaged by the licensee’s failure to pay wages.”].)7 The term “wages” includes
benefits to which employees are entitled as a part of compensation, vacation and sick pay,
and deferred compensation such as pension and retirement benefits. (Brown v. Superior
Court (2011) 199 Cal.App.4th 971, 994; People v. Alves (1957) 155 Cal.App.2d Supp.
870, 871-872 [payments to a health or welfare fund under a collective bargaining
agreement are wages].) Therefore, a judgment for the failure to pay pension and other
benefits is a judgment for the failure to pay “wages” to employees, and thus falls within
the reporting requirement of section 7071.17 as the failure to pay an employee. This is so
irrespective of whether it was the employees or the employees’ agent and fiduciary, i.e.,
the pension benefit trust fund, who sued to collect those benefits.
       Pacific next cites section 7071.17, subdivision (e) which clarifies that section
7071.17 applies only to unsatisfied judgments that are “substantially related to the
construction activities of a licensee licensed under this chapter, or to the qualifications,
functions, or duties of the license.” (§ 7071.17, subd. (e), italics added.) Pacific argues
that failure to pay union benefits to a union trust fund under a collective bargaining
agreement is not substantially related to construction activities or to the qualifications,
functions, or duties of the contractor’s license.
       On the contrary, the Board considers payments of pension benefits to employees
to be “substantially related to the construction activities of a licensee.” The reference
book, available to contractors, explains with respect to section 7071.17, subdivision (e)
that the Board “broadly interprets this section of law to mean that if the judgment relates
to your construction business in any way, it is considered construction-related. It does

7
       After 2008, section 7071.5 subdivision (c) became subdivision (d).

                                              8
not mean that you had to necessarily contract with the judgment creditor to build
something. If you did not pay your office rent, your office utility bills, your material
supplier, subcontractor, employee, or any other bill incurred by your business, [the
Board] will consider it construction-related. Very few judgments received by [the Board]
are not construction-related. If you feel confident that your judgment is not
construction-related, you should provide [the Board] with documentation that will
support your statement.” (Cal. Contractors License Law & Reference Book (2015 ed.)
§ 1, The California Contractor License, ch. 2, pp. 33-34, italics added.)
       “We give ‘great weight’ to ‘contemporaneous administrative construction of a
statute by an administrative agency charged with its enforcement and interpretation’ ”
(First Bank v. East West Bank (2011) 199 Cal.App.4th 1309, 1315) unless clearly
erroneous or unauthorized (Munroe v. Los Angeles County Civil Service Com. (2009)
173 Cal.App.4th 1295, 1303). In this case, we defer to the Board’s interpretation of
section 7071.17 because the Board was the sponsor of the bill enacting that law.
(Sen. Com. com on Bus. & Prof. SB 1061, as introduced Feb. 24, 1995, p. 2; Stats. 1995,
ch. 467, § 6.) Based on the Board’s interpretation, the payment of employee pension
benefits falls within Gold Coast’s construction business. Therefore, the stipulated
judgment for the nonpayment of pension benefits is “an unsatisfied final judgment that is
substantially related to the construction activities of a licensee licensed under this
chapter, or to the qualifications, functions, or duties of the license” pursuant to section
7071.17, subdivision (e).8
       It makes no difference to the outcome that Gold Coast is an equipment supplier
and not a general contractor, Pacific’s contention to the contrary notwithstanding. Gold
Coast is a licensee under the Contractor’s State Licensing Law and its employees, whose
benefits were the subject of the stipulated judgment, did “union jobs” for Pacific.

8
        Pacific’s assertion is unavailing that the Board never made a “finding” that the
stipulated judgment fell within the meaning of section 7071.17. ABPA attached a copy
of the stipulated judgment to its letter notifying the Board, and so the Board implicitly
considered that document when it suspended Gold Coast’s license.

                                              9
       For the foregoing reasons, the stipulated judgment falls within the ambit of section
7071.17.
       b. The stipulated judgment was unsatisfied.
       Pacific next contends “at no time” was there an “unsatisfied final judgment” as
that term is used in section 7071.17. It first insists that negotiations were ongoing and
partial payments were made, with the result that it was not unsatisfied until March 26,
2003, which is when ABPA notified the Board. However, Gold Coast was obligated to
notify the Board as soon as the stipulated judgment was entered. The version of section
7071.17 in effect at the time Gold Coast entered into the stipulated judgment required
notification to the Board of “any entered and unsatisfied judgments within 90 days from
the date of judgment.” (§ 7071.17, former subd. (b), italics added.) The Board made that
clear to Gold Coast in its letter notifying the contractor of the automatic suspension.
Likewise, the statute’s current version requires notification of “any unsatisfied final
judgment imposed on the licensee.” (§ 7071.17, subd. (b).) As soon as the stipulated
judgment was entered, it was “imposed” and “unsatisfied,” regardless of whether Gold
Coast thereafter made installment payments.
       Gold Coast also suggests that the stipulated judgment was not “final.” However,
“[a] stipulated judgment is as conclusive as to the matters in issue it determines as a
judgment after trial.” (Sargon Enterprises, Inc. v. University of Southern California
(2013) 215 Cal.App.4th 1495, 1507.)
       To summarize, the stipulated judgment was an unsatisfied final judgment within
the meaning of section 7071.17, notwithstanding Gold Coast made payments through
September 2001. Under section 7071.17, subdivision (b), Gold Coast was obligated to
alert the Board of the stipulated judgment. The contractor’s failure to notify the Board
caused the automatic suspension of both Gold Coast’s and Pacific’s licenses when the
Board learned of the unsatisfied stipulated judgment. Thus, there was a lapse in licensure
during the time Pacific was performing under its subcontract with Bernards in violation
of section 7031, subdivision (a).


                                             10
       2. The evidence supports the trial court’s finding Gold Coast did not “act[]
reasonably and in good faith” to maintain its license.
       Having concluded that Gold Coast was obligated to notify the Board of the
stipulated judgment and failed to do so, we turn to Pacific’s contention that the trial court
erred in finding that Gold Coast did not satisfy the second prong of the substantial
compliance exception to the licensure requirement because it did not “act[] reasonably
and in good faith to maintain proper licensure.” (§ 7031, subd. (e)).
       The evidence supports the trial court’s finding that Gold Coast did not act
reasonably and in good faith. Had Gold Coast notified the Board of the stipulated
judgment in 2000, as it was required to do, it could have avoided the suspension by
posting the appropriate bond. (§ 7071.17, subd. (b).) If the McDaniels’ failure to notify
the Board was the result of ignorance of the notification requirement, then they acted
unreasonably. The McDaniels have been in the contracting business for decades and in
any event, they are presumed to know the law’s requirements. (Alatriste v. Cesar’s
Exterior Designs, Inc. (2010) 183 Cal.App.4th 656, 665.) If the McDaniels did not think
the stipulated judgment was substantially related to Gold Coast’s construction activities,
such as would trigger the notification requirement, they were obligated to provide the
Board with support for their position (Cal. Contractors License Law & Reference Book,
supra, § 1, ch. 2, p. 34), not merely to ignore the statute. Their failure to notify the Board
on that ground would likewise be unreasonable. Lastly, if the McDaniels did not notify
the Board for fear the licenses would be suspended, then they did not act in good faith.
The substantial compliance exception to the forfeiture rule is “extremely narrow” and
applies “only where a contractor was without a license owing to circumstances truly
beyond his control.” (Construction Financial v. Perlite Plastering Co. (1997) 53
Cal.App.4th 170, 182.)
       Pacific contends it acted in good faith but “simply did not have the financial
ability to pay the stipulated judgment.” Pacific argues that the policy behind the
forfeiture of section 7031 is to protect the public from unscrupulous and incompetent
contractors whereas Pacific was not unscrupulous, just broke. (Hydrotech Systems, Ltd.

                                             11
v. Oasis Waterpark (1991) 52 Cal.3d 988, 995.) However, the purpose of the forfeiture
statute is not solely to weed out unprincipled contractors, but also to assure that
contractors “understand applicable local laws and codes, and know the rudiments of
administering a contracting business.” (Ibid.) The statutory disallowance of claims for
payment by unlicensed subcontractors reflects a longstanding policy. (Id. at pp. 998-
999.) Section 7031 “applies despite injustice to the unlicensed contractor.” (Hydrotech
Systems, Ltd. v. Oasis Waterpark, supra, at p. 995, italics added.) 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 . . . .” ’ ” (MW Erectors, Inc. v. Niederhauser Ornamental & Metal Works Co.,
Inc., supra, 36 Cal.4th at p. 423.)
       Pacific next argues the second prong of the substantial compliance exception
“pertains to post-suspension conduct prior to learning of a suspension and not to pre-
suspension conduct.” (Italics added, italics omitted.) It is not immediately clear what
Pacific means by this contention. The phrase “acted reasonably and in good faith to
maintain proper licensure” (§ 7031, subd. (e), italics added) pertains to conduct prior to
suspension. “Maintain” means to “continue; . . . hold or preserve . . . keep in existence or
continuance; keep in force; keep in good order . . . .” (Black’s Law Dict. (6th ed. 1990)
p. 953, col. 2.) By contrast, prong four, “acted promptly and in good faith to reinstate his
or her license upon learning it was invalid” (§ 7031, subd. (e), italics added), clearly
relates to post-suspension conduct. At issue here was Gold Coast’s failure to act
reasonably to maintain its license by causing its suspension.9
       Finally, Pacific insists that it satisfied the substantial compliance exception’s
fourth prong because it acted promptly and in good faith to reinstate its license upon
learning of the suspension. Unfortunately, Pacific must satisfy every prong of the
substantial compliance exception; it is not enough to satisfy only two. (Pacific Caisson,
supra, 198 Cal.App.4th at p. 694.)

9
       See footnote 5, ante.

                                             12
                                  DISPOSITION
     The judgment is affirmed. Each party to bear its own costs.


     CERTIFIED FOR PUBLICATION




                                              ALDRICH, J.




We concur:




             EDMON, P. J.




             KITCHING, J.




                                         13
