Construction Law Alert: Contractor Licensing Update

In Montgomery Samsone L.P. v. Zhian Z. Rezai, the Court of Appeal held summary judgment is not appropriate where a contractor provides evidence a licensed entity is the same as an unlicensed contracting entity.

Plaintiff contractor filed a lawsuit for breach of contract and foreclosure of mechanic’s lien arising from an apartment complex renovation. Montgomery Samsone L.P. held a valid contractor’s license. The plaintiff had also filed a fictitious name statement purportedly filed on behalf of Montgomery Samsone Ltd., L.P. a “general partnership.” The construction contract referred to plaintiff by this latter name. The defendant contended in its motion for summary judgment that the plaintiff was barred from recovery under Business and Professions Code section 7031 et seq. because it contracted with Montgomery Samsone Ltd., L.P., a general partnership that did not have a license. The trial court granted summary judgment.

The Court of Appeal reversed. The court concluded that while the plaintiff technically held itself out as a separate business, the plaintiff showed evidence it had obtained and held a valid license. Moreover, the plaintiff carried the burden of showing significant indicia the contracting entity was in fact the same as the licensed entity. As such, the court reversed the order granting summary judgment.

Montgomery reflects the continuing prominence of licensure issues in construction litigation. California courts continue to strictly interpret the licensure requirement, and Montgomery represents a narrow exception to this approach. In general, California imposes drastic penalties for licensing violations, including disgorgement of all compensation received, if the contractor is unlicensed at any point while rendering construction services.

This document is intended to provide you with information about construction law related developments. The contents of this document are not intended to provide specific legal advice. This communication may be considered advertising in some jurisdictions.

April 6, 2012