In a decision which follows an onerous trend for California contractors,
the California Court of Appeal, Second Appellate District, ruled that a corporate
entity subcontractor could not seek compensation for work on a project even
though the corporate entity contractor was properly licensed prior to the date the
contract was fully executed and before any on-site work took place.
In a stunning further reversal of fortunes for California contractors, the
Second District Court of Appeal ruled in Great West Contractors, Inc. v. WSS
Industrial Construction, Inc. (2008) DJDAR 6138 (herein, the “Great West
Contractors, Inc.” case) that a steel subcontractor could not recoup compensation
for work performed on a school project even though (i) the contract was not
executed by the general contractor until after the subcontractor had obtained a
valid license; and (ii) all on-site work took place after licensure had been
obtained. This decision follows a trend whereby the courts have severely limited
the doctrine of substantial compliance under Business & Professions Code
section 7031(e). See also, MW Erectors, Inc. v. Neiderhauser Ornamental & Metal
Works Co., Inc. (2005) 36 Cal.4th 412; Pacific Custom Pools, Inc. v. Turner
Construction Co. (2000) 79 Cal.App.4th 1254; and Construction Financial v.
Purlite Plastering Co. (1997) 53 Cal.App.4th 170, 176-177.
The facts of the Great West Contractors, Inc. case are common enough. In
that case, plaintiff WSS Industrial Corporation, Inc. (“WSS”) a steel
subcontractor, sued general contractor and defendant Great West Contractors,
Inc. (“Great West”) to recover for work WSS performed under a subcontract with
Great West for improvements on a public works project at the New Middle
School For the Deaf in Riverside, California. On August 28, 2001, WSS submitted
a bid proposal to Great West to perform steel construction work on the project
for $440,000.00. At the time WSS submitted its August 28, 2001 bid, it was
incorporated in California but had only applied for, and had not yet obtained, a
corporate contractor’s license. The license was issued by the California State
Contractors License Board on December 21, 2001.