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District Court of Appeal, Third District, California.


Civ. 7086.

Decided: January 31, 1945

Smallpage & Macomber, of Stockton, for appellant. Gumpert & Mazzera and J. Calvert Snyder, all of Stockton, for respondents.

This is an appeal by the defendant corporation from a judgment of the trial court in favor of plaintiffs.

Plaintiffs, as individuals, by their amended complaint, alleged that within two years last past defendant became indebted to them for labor furnished to defendant at its special instance and request upon a written contract and oral modifications thereof; that no part of the sum alleged to have been owing had been paid, and that at all times mentioned in said complaint plaintiffs and each of them were licensed building contractors within the meaning of Chapter 9, Articles 1 to 6, inclusive, of the Business and Professions Code.

Defendant's amended answer admitted a written agreement with plaintiff Gatti but denied that the contract was modified or changed between plaintiffs and defendant, or that any agreement, oral or written, was ever made with the plaintiff Moore; that the contractual relationship between Gatti and Moore was unknown to defendant except as disclosed by documents filed in the action and the testimony of Gatti previously received in evidence, and that upon the date of the filing of plaintiffs' complaint all monies owing under said contract with Gatti had been paid. By way of an offset it was alleged that plaintiffs were obligated to pay defendant the damage caused by plaintiff alleged breach of the contract and failure to complete the work. A separate counterclaim was set forth wherein it was charged that plaintiffs breached their contract by abandoning the construction work, thereby damaging the defendant in the amount therein specified. As a separate defense defendant alleged upon information and belief that from and after June 1, 1943, a partnership existed between the plaintiffs but that at no time did such partnership have issued to it a contractor's license by this state.

Upon conclusion of the hearing the trial court found in favor of plaintiffs and entered judgment accordingly. Defendant's appeal is now before us upon a settled statement. Such statement as regards the oral proceedings discloses the following facts relative to the sole question presented to this court: Prior to March 15, 1942, both Gatti and Moore had issued to them individual licenses as contractors under the provisions of the Business and Professions Code; that on March 15, 1943, Gatti and defendant executed a written contract whereby Gatti agreed to perform certain carpenter work for defendant; that at this time Moore was foreman for Gatti; that on June 1, 1943, plaintiffs discussed conducting the construction work herein involved on a partnership or joint venture basis and agreed with the consent of defendant that thereafter the work would be so conducted; that all of the work performed by plaintiffs prior to June 1, 1943 has been fully paid; that on August 23, 1943, a builder's and contractor's license was issued in the names of Albert Gatti, Chas. D. Moore and Delbert Moore; that Delbert Moore is not a party to this action and has no interest in the proceeds of the venture herein involved; that no license was ever issued in the names of Albert Gatti and Chas. D. Moore, either as a partnership or as joint venturers under the provisions of the Business and Professions Code, Chapter 9, Articles 1 to 6, inclusive, and that the work in question was performed by plaintiffs at defendant's special instance and request under a written contract and oral modifications thereof.

The Business and Professions Code sections pertinent to a determination of this appeal provide that no person (as the word is used in Section 7025, St.1939, p. 384, which includes individual or other business organization) acting in the capacity of a contractor may maintain any action for the collection of compensation for such work without alleging and proving he was a duly licensed contractor at all times during the performance of the contract. Section 7028 provides that it shall be unlawful for any person to engage in such business without a license while section 7030 states that any one acting without a license or conspiring with any person to violate any provision of the act is guilty of a misdemeanor. It is then provided in section 7029 that it shall be unlawful for two or more individuals holding individual licenses to act jointly in the capacity of a contractor without first obtaining an additional or joint license. And lastly, section 7068, St.1941, p. 2604, provides that the board shall require such knowledge of the building, safety, health and lien laws of this state, and general principles of the contracting business as the board deems ‘necessary for the safety and protection of the public.’

The sole issue raised by appellant is that plaintiffs at no time had a contractor's license issued to them, either as a partnership or a joint venture in accordance with the provisions of the Business and Professions Code, and therefore cannot recover.

In support of such contention it is argued that as the statute makes it a crime for individual licensees to jointly submit a bid or otherwise act in the capacity of a contractor without first having secured an additional license to act as a partnership or joint venturers, the contract in question is illegal, and that plaintiffs, therefore, are precluded from maintaining their action in that to establish their case they must place reliance upon a void transaction. As a general rule it may be said that when it appears there has been a violation of a statute primarily designed for the protection of the public with a penalty prescribed for the violation thereof, such penalty is the equivalent of an express prohibition—that a contract made contrary to such statutory requirements is void and no action may be brought to enforce it. Berka v. Woodward, 1899, 125 Cal. 119, 57 P. 777, 45 L.R.A. 420, 73 Am.St.Rep. 31; Citizens State Bank, etc., v. Gentry etc., 1937, 20 Cal.App.2d 415, 67 P.2d 364; Wise v. Radis, 1925, 74 Cal.App. 765, 242 P. 90.

This rule, however, is subject to the qualifications that in order to justify a legislative body in interposing its authority, the interest of the public generally must require such interference and the legislation so enacted must be reasonably necessary for the accomplishment of such legislative purpose. Where the police power is so invoked to regulate a lawful business it is always a judicial question whether such regulation is a valid exercise of that power. Mattei v. Hecke, 99 Cal.App. 747, 279 P. 470.

Therefore it may be said that if, as respondents contend in support of the judgment, the provision in question, section 7029, is invalid as an unreasonable exercise of the police power of the state, plaintiffs have complied completely with all valid sections of the act and the judgment must be sustained.

In considering the constitutional question so raised we must assume that by virtue of the enactment of the Contractor's License Act by the legislature it has been declared as a policy of this state that the business of a builder and contractor is of such a nature as to warrant regulation under the police power and that such legislation having as its object the prohibition of persons engaging in such business without the qualifications set forth in section 7068 et seq. is a proper exercise of such power. The power to so prohibit inexperienced contractors rests upon the duty of the legislature to protect the public from the acts and injuries which might follow from the activities of such inexperienced persons. The police power of the state is an indispensable prerogative of sovereignty and one that is not to be lightly limited even though at times (as in the present case) it may seem harsh. It is not, however, illimitable. Its exercise and application must be determined by a consideration of the question of whether or not any invocation of that power when applied to the existing conditions of a particular case is reasonably necessary to promote the public health, safety, morals or public welfare. Wholesale Tobacco Dealers v. National, etc., Co., 1938, 11 Cal.2d 634, 82 P.2d 3, 118 A.L.R. 486. Neither the declaration in the statute as to its purposes nor the sincerity of purpose on the part of the legislature determines whether the means provided in the statute are reasonably designed to accomplish those purposes. Wholesale T. Dealers v. National, etc., Co., supra. That question is a proper inquiry for the courts. The soundness of the enactment rests solely with the legislature, and the province of the courts to determine the reasonableness of such legislation is confined within the limitations previously mentioned, but if the question be reasonably debatable the determination by the legislature is conclusive. It therefore follows that the power of the courts should be exercised with caution and then only when it clearly appears that the statute attacked as invalid is entirely beyond the limits which bound the police power and thereby infringe upon rights secured by the fundamental law. 5 Cal.Jur. sec. 117, p. 714. Under such circumstances it is proper that when the charge is made as in the present case that an act is unreasonable the burden of showing its unreasonableness be cast upon the party attacking its validity. In re McCoy, 10 Cal.App. 116, 101 P. 419.

Respondents' contention is merely that as both of them had individual licenses at all times during the course of the contract, and prior to the conclusion thereof had secured a partnership license with a third party, they had complied with all of the valid portions of the act; that the requirement of an additional license to act in the capacity of a partnership or joint venture was neither reasonable nor necessary for the ‘safety and protection of the public’ in that plaintiffs had demonstrated their qualifications to act as contractors when they qualified for and were issued individual licenses. As authority for such conclusion the case of Hardwick v. Board of School, etc., 1921, 54 Cal.App. 696, 205 P. 49, is cited. We have no complaint with the decision in the cited case as a general statement of the law in relation to the factual situation therein presented, but we do not believe it to be of appreciable assistance as regards the issue now before us.

It is not enough for respondents to say that their experience and rudimentary knowledge of the contracting business, sec. 7068, which was sufficient to qualify them originally for individual licenses is all that the state can require.

That requirement is but one of the elements provided in the act as necessary for original qualifications as a contractor. Other portions thereof (Articles 4, 5 and 7) set forth various matters which might well form the basis of legitimate inquiry by the licensing agency as a condition precedent to the issuance of the additional partnership or joint venture license required by section 7029. However, it is not for this court to rationalize the validity of such requirements. If respondents would evade such regulatory provisions it is they who must show that such provisions are clearly beyond the limits of legislative police power. It, therefore, follows that as respondents have not made sufficient showing in this regard they have not sustained the burden of proof necessary to overcome the presumptions of validity which attach to such regulatory enactments.

The judgment is reversed.

PEEK, Justice.

ADAMS, P. J., and THOMPSON, J., concur.

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