Contractors – Standing re Seek Quantum Meruit

E.J. Franks Construction, Inc. v. Bhupinder K. Sahota, et. al., 2014 WL 2526978 (C.A. 5th, June 5, 2014)

At issue is whether a plaintiff corporation could sue under quantum meruit for work performed at defendant’s residence when the licensed sole proprietor contractor was the party who entered into the contract with the homeowner.

Facts: Mr. Franks became a licensed general building contractor in 1995 and operated a sole proprietorship for years. During the course of constructing a home for defendants, Mr. Franks incorporated his company under the name E. J. Franks Construction, Inc. (EJFCI) and on April 12, 2005, his contractor’s license was reissued to the corporation.

In December 2006, EJFCI filed a Complaint against defendants to foreclose on a mechanics lien, breach of contract, common counts and quantum meriut.  Defendant cross-complained for breach of contract and fraud.   Prior to trial, the court rile EJFCI was limited to it claims of “quantum meriut or unjust enrichment.”  The jury trial commenced  in June 2012.  The jury reached a verdict in favor of EJFCI on its complaint and against the defendants on their cross-complaint.

Defendants sought a new trial, or in the alternative, a remittitur.  Defendants also filed a motion for judgment notwithstanding the verdict.   Defendants argued EJFCI was prohibited by Business and Professions Code section 7031 from pursuing quantum meruit damages because it was an unlicensed contractor at the time the construction contract was executed.

The trial court rejected defendants’ claim. The trial court reasoned B&P Code Section 7031 did not apply to the unique situation in this case because to do so would not advance the statute’s goal of precluding unlicensed contractors from maintaining actions for compensation.

Holding: The Court of Appeal affirmed the trial court’s ruling the plaintiff corporation could sue for quantum meruit for work performed.  The Court of Appeal noted B&P Code Section 7031 is directed at precluding unlicensed contractors from maintaining actions for compensation.  However, B&P Code Section 7031 does not apply here because at no time was the work performed on defendants’ house by an unlicensed contractor.

In this case, the work commenced pursuant to a contract with E.J. Franks Construction, as a sole proprietor.  When the parties entered into a contract, E.J. Franks Construction was a licensed general contractor, having been issued a license on April 1995.  During the course of the project, E.J. Franks Construction incorporated and the licensed issued to E.J. Franks Construction was reissued to the corporation on April 2005.  Therefore all of the work accomplished at defendants’ residence was performed by a licensed contractor.


ABOUT THE AUTHOR: David Ramirez is a Senior Counsel at TYSON & MENDES, LLP, and primarily represents clients in complex litigation, including construction defect, insurance law, property disputes, and product liability.  Mr. Ramirez was recently named as a “Top Lawyer” in California for “Litigation” in the June 2014 issue of American Lawyer Media.

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