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District Court of Appeal, Third District, California.

E. W. TRACY, Petitioner and Respondent, v. CONTRACTORS' STATE LICENSE BOARD of the State of California, Respondent and Appellant.

Civ. 10997.

Decided: June 09, 1965

Stanley Mosk and Thomas C. Lynch, Attys. Gen., by E. G. Funke, Asst. Atty. Gen., by N. Eugene Hill, Deputy Atty. Gen., for appellant. Forrest E. Macomber, Stockton, for respondent.

Respondent, E. W. Tracy, petitioned the Superior Court of Sacramento County for a peremptory writ of mandamus commanding appellant Contractors' State License Board (the Board) to reinstate Tracy's contractor's license. The Board has appealed from the judgment granting the writ.

In September 1962 an accusation was filed against Tracy, a licensed contractor, charging him with a violation of Business & Professions Code section 7113.5 which at the time provided, in part:

‘The adjudication of bankruptcy of a licensee * * * constitutes a cause for disciplinary action.’ (State.1961, ch. 1636, sec. 7.)

It was established at the hearing on said accusation that Tracy had been adjudicated a bankrupt and that a substantial portion of the liabilities from which he sought to be discharged in said bankruptcy proceedings represented amounts owed by him for labor, supplies and materials furnished to him for his use as a licensed contractor.

After the hearing the Registrar of Contractors adopted a proposed decision for the suspension of Tracy's license until such time as Tracy shall: (1) present to such Registrar a release of each and every claim against him of the Joint Delinquency Committee of the Carpenters Health & Welfare Trust Fund for Northern California, the Four Bay Counties Vacation Trust Fund, the Forty-two Northern California Counties Carpenters Vacation Trust Fund and the Carpenters Pension Trust Fund for Northern California, ‘even though the same were discharged in bankruptcy;’ (2) give a bond made pursuant to Business & Professions Code section 7071.5.

In the mandamus proceedings the sole contentions were that section 7113.5 was unconstitutional (1) being in conflict with the U. S. Bankruptcy Act, and (2) in violation of the Fourteenth Amendment of the United States Constitution.

The judgment of the trial court, entered April 28, 1964, was prior to the decision of this court in Hope v. Contractors' etc. Board (July 10, 1964), 228 Cal.App.2d 414, 39 Cal.Rptr. 514. In that case we held (1) that the provisions of section 7113.5 making bankruptcy or acts of bankruptcy a cause for disciplinary action against a licensed contractor are a proper exercise of the state's police powers where the acts of bankruptcy relate to the licensee's business as a contractor; (2) that the provisions of said section are not in conflict with the federal Bankruptcy Act.

We have not changed our views as expressed in that decision.

However there is a difference which we consider to be distinguishing between the order made in the Hope case and the proposed order here. As noted above, in the case at bench the proposed order provides that the suspension of Tracy's license shall continue until such time as he has obtained a release of all of the claims of a type specified previously discharged in bankruptcy. Effectually, this is a predetermination by the Board that under no circumstances will Tracy be permitted to seek reinstatement as a contractor unless and until his past debts have been paid, regardless of his future demonstrated financial responsibility. We hold that such predetermination exceeds the Board's power.

In the Hope case we held Business & Professions Code section 7113.5 constitutionally gave the Board power to consider acts of bankruptcy as a cause for disciplinary action (extending even to the revocation of a license); that this was a proper exercise of the state's police power and did not infringe upon the bankruptcy power exclusively in the federal Government. That was the limit of our holding. We did not assert that an adjudication of bankruptcy may forever unequivocally disqualify the bankrupt contractor from reinstatement. We do not construe section 7113.5 as conferring upon the Board or its Registrar power so to determine. So construed the section would be an attempt to extend its scope beyond any legitimate state police power purpose and this would be in derogation of the federal bankruptcy power.

The power of the Registrar to consider Tracy's bankruptcy a factor to be taken into consideration in determining whether he is a person presently qualified to hold a license does not equate with the power to consider a past bankruptcy with unsatisfied claims as a stigma perpetually and incurably barring a future reinstatement.

A peremptory writ prohibiting the order as proposed was therefore proper, but that directed by the trial court (which was based upon its determination that the section itself was unconstitutional) was too broad for the reasons stated in the Hope case and herein.

Judgment is reversed and the trial court is directed to issue a peremptory writ requiring appellant to vacate the Registrar's decision of August 20, 1963 but without prejudice to such further disciplinary action by the Registrar against petitioner as may be determined to be proper under section 7113.5 as interpreted in Hope v. Contractors State License Board, supra, and as interpreted herein.

PIERCE, Presiding Justice.

FRIEDMAN and REGAN, JJ., concur. Hearing granted; MOSK, J., not participating.

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