Morrison Law Journal
Morrison Law Group logo

The Morrison Law Journal
March 2011
Volume VI, Edition 3

A Rare Win - Court of Appeal Rules Subcontractor Which Lacked
Specialty Contractor's License Required' Under Subcontract Agreement
For Public Works Project Could Satisfy Its Proof Of Licensure
| Obligation Based On Its Class "A" General Engineering Contractor's

By: Edward F. Morriso n, Jr., Esq.
Larry A. Schwartz, Esq.

As many are aware, the California Courts have ruled, in construing the
California Contractor's State License Law, Business and Professions Code S 7000,
et seq., that a contractor must have a valid license at all times when work is
performed under contract. See, Hydrotech Systems, Ltd. v. Oasis Water Park
(1991)52 Ca1.3rd 988, MW Erectors, Inc. v. Niederhauser Ornamental.and Metal
Works Co., Inc.
(2005)36Ca1.4th 412, Advantec Group, Inc. v. Edwin's Plumbing
Co., Inc.
(2007)153Cal.App.4th 621 and Alatriste v. Cesar's Exterior Designs, Inc.
(2010)183Cal.App.4th 656. Failure to maintain licensure will result in a claim by
the property owner for "disgorgement" of all monies paid to the contractor.
Business and Professions Code S 7031(e).

A still open question is whether a subcontractor which executes a
subcontract agreement requiring a' specialty contractor Class "C" license as
contemplated by Business and Professions Code S 70581 and performs work
which would otherwise require a specialty contractors license can satisfy its
licensing obligation solely on the basis of its having a Class "A" general
engineering license as contemplated by Business and Professions Code S 70562.
In that regard, the California Court of Appeal, Second District, recently provided
some guidance with respect to that question in Pacific Caisson & Shoring, Inc. v.
Bernards Bros. Inc.
(2011)193Cal.App.4th 246 ("Pacific Caisson").

I Business and Professions Code ~ 7058defines a "specialty contractor" to be "a contractor whose
operations involve the performance of construction work requiring special skill and whose
rrincipal contracting business involves the use of specialized building trades or crafts".
2 Business and Professions Code ~ 7056 defines a "general engineering contractor" to be a
"contractor whose principal contracting business is in connection with fixed works requiring
specialized engineering knowledge and skill, including the following divisions or
leveling and earthmoving projects,' excavating, grading, trenching, paving and surfacing work
and cement and concrete works in connection with the above mentioned fixed works".


The facts of the Pacific Caisson case are straightforward enough. In
Pacific Caisson, Pacific Caisson & Shoring, Inc. ("pacific Caisson") entered into a
subcontractor agreement with general contractor Bernards Bros. Inc. ("Bernards
Brothers"). The subcontract was entered into in 2002 and called for Pacific
Caisson to provide temporary excavation and support work for a medical center
for the County of Ventura for a _~ontractprice of $360,000. The prime contract,
the terms of which were incorporated into the subcontract, required the
subcontractor which provided excavation support to maintain a Class IC-12"3
specialty earthwork and paving contractor's license.

Pacific Caisson appears to have performed its work between July 2002and
October of 2003. Pacific Caisson did hold a Class IIA" general engineering
contractor's license during that time period but never obtained a Class IC-12"
specialty license. Also, Pacific Caisson's Class "A" general engineering license
was suspended for approximately three months between April 2003 and June

Pacific Caisson later sued Bernards Brothers for $544,567owed under its
subcontract. Thereafter, Bernards Brothers cross-complained, moved for
summary judgment under Business and Professions Code S 7031and demanded
approximately $206,000 - representing "disgorgement" of money it paid to a
Pacific Caisson as an alleged unlicensed contractor. By its Motion for Summary
Judgment, Bernards Brothers contended that Pacific Caisson's admitted failure to
maintain a Class IC-12"specialty license, as called for under the prime contract
with the public entity, .required a finding that it was unlicensed. Bernards
Brothers also contended' that the suspension of Pacific Caisson's Class IIA"
general engineering license required the same finding.

After a hearing on the Motion for Summary Judgment and aMotion for
Reconsideration, the Trial Court ruled in favor of Bernards Brothers finding that
Pacific Caisson was not a properly licensed contractor due to the fact that it did
not have a Class IC-12"specialty license and awarded disgorgement damages.

PaCificCaisson appealed.

On appeal, the Court of Appeal determined that, by virtue of its Class "A"
general engineering license, Pacific Caisson was indeed a "duly licensed
contractor II as required by the Contractor's State Licensing Law, and specifically
Business and Professions Code S 7031(a). In its ruling, the Court of Appeal noted
that the licensing requirements merely "provide minimal assurance that all

3 16 California Code of Regulations S 832.12 defines a Class C-12 earthwork and paving contractor to be
"an earthwork and paving contractor which digs, moves and places material from the surface of the earth,
other than water, in such a manner that a cut, fill, excavation ... can be executed".


persons offering such services in California have the requisite skill and character
[and] understand applicable local laws and codes". The Court of Appeal further
noted that because a Class "A" general engineering contractor is a contractor
whose principal work is in connection with fixed works requiring specialized
engineering knowledge and skill involving a broad scope of types of works,
including earthwork, a separate specialty license was unnecessary citing Ron
Yates Construction Co. v. Superior Court
(1986)186Cal.App.3rd 337.

Moreover, the Court of Appeal held that, at least under the facts of Pacific
, a contractual obligation to hold a specialty license would not provide
. the basis to find a contractor unlicensed. In that regard, the Court of Appeal
acknowledged the provisions of Business and Professions Code S 7059 which
permit government bodies to specify requirements for bidding, but ruled that the
facts of Pacific Caisson were different because that statute deals with agreements
between the governmental entity and the. contractors it engages and not third
parties (for which there is no privity). The Court of Appeal then remanded the
matter. for a trial as to whether Pacific Caisson could prove substantial
compliance with respect to its licensing obligation given its nearly three month
suspension of its Class" A"general engineering license.

The ruling in Pacific Caisson does mark a departure from recent case law
in defining the obligations of a contractor in proving licensure. The most
significant aspect of Pacific Caisson, separate and apart from the holding in favor
of the subcontractor, is that a subcontractor may potentially use a Class "A"
general engineering license to satisfy a contractual obligation to maintain a
specialty license on a public works project (at least where the subcontractor is not
in privity with the public entity). It is the author's view that specialty license
subcontractors engaged in fixed works projects should consider applying for
Class "A"general engineering licenses at least with respect to large public works

About the Authors: Edward F. Morrison, Jr. is the founding partner and Larry A.
Schwartz is Of Counsel to The Morrison Law Group, a professional corporation.
Their biographies can be viewed at

Publication Note: The Morrison Law Group wishes to disseminate this
publication to all clients and colleagues of the Firm who wish to receive it.
Should any recipient desire to be removed from the distribution list, or wishes to
have a colleague added, please contact Jim Van Dusen at The Morrison Law
Group at 213356-5504or


Disclaimer Note: The legal article presented above is intended to provide
general information which may be of interest or use to clients and colleagues of
The Morrison Law Group and should not be construed as legal advice on any