WHEN CAN COURTS SUSPEND OR REVOKE THE LICENSE OF A CALIFORNIA CONSTRUCTION CONTRACTOR?

`Most construction professionals and much of the general public know that the California Contractors State License Board (www.cslb.ca.gov) has the power to issue contractors licenses to - and to suspend or revoke the contractors licenses of - various types of general or speciality contractors and subcontractors.

Among the grounds for suspension or revocation of contractors'; licenses are violations of the Building Code or local Building permit requirements, work below the prevailing local "Standard of Care" for negligence of Contractors, working with unlicensed contractors or subcontractors, acting outside one';s license classification, abandonment of work or failure to complete work for the price agreed, failure to pay workers, suppliers or other subcontractors, failure to have workers'; compensation insurance for employees, violation of the Home Improvement Contract requirements, certain criminal convictions, and many other grounds. See Bus. & Prof. Code §§ 7107- 7127, and others.

Of these, violations of the Home Improvement Contract requirements (Bus. & Prof. Code §§ 7151- 7170 are likely the most frequent grounds for disciplinary actions against contractors, as they were designed to protect consumers.

But less known is the fact that Courts also have the power to suspend or revoke the licenses of contractors and subcontractors in cases before them.

California Bus & Prof Code § 7106 provides:

"The suspension or revocation of license as in this chapter provided may also be embracedin any action otherwise proper in any court involving the licensee's performance of his legal obligation as a contractor ." (Emphasis added).

This statute applies to cases where the question involved is "the licensee's performance of his legal obligations as a contractor." Problems involving the "performance" of the "legal obligations" of a contractor arise after the contractor has entered into a contract for the performance of some work and some dispute has arisen. Judson Pacific-Murphy Corp. v. Durkee (1956) 144 Cal. App. 2d 377, 385-386(declining to revoke license where no contract had yet been entered into by the contractor in question 1); Fechi v. Trojan Constr. Co. (1960) 185 Cal. App. 2d 121, 125 .

The statute makes clear that the court';s power to suspend a license "may also be embraced in any action otherwise proper in any court", in addition to the power of the License Board in this same Article of the Statute, to "also" impose suspension under Bus & Prof. Code § 7090 et seq."Also" obviously means "in addition".

That the power of the Registrar of Contractors 2 and of the Court may be "also" exercised independently of each other, and that the action of one does not preclude the other from acting, is evident in Bus & Prof. Code § 7106.5:

"The expiration, cancellation, forfeiture, or suspension of a license by operation of law or by order or decision of the registrar or a court of law, or the voluntary surrender of a license by a licensee shall not deprive the registrar of jurisdiction to proceed with any investigation of or action or disciplinary proceeding against the license, or to render a decision suspending or revoking the license."

Thus, even though a license may have been suspended or revoked by operation of law, or by an order or decision of either the registrar or a court of law, that does not preclude the Registrar from also initiating separate administrative proceedings for suspending or revoking the same license.

Rather, the "administrative remedy" (whatever that is claimed to be) and the judicial remedy are alternatives to each other, so the purported "administrative remedy" need not be exhausted. 3 Witkin, California Procedure (5th Ed. 2008), Actions, § 320.

There is no hint in either of these statutes that an administrative decision by the Registrar must first be sought before relief in court may be obtained in the first instance, or that the court has no power on its own to suspend or revoke a license. In fact, the statute expressly says otherwise.

Section 7106 also allows a court - which already has before it a case involving the contractor';s performance on an actual project and his "performance of hislegal obligationas a contractor."- to also impose discipline against the contractor based on the facts and evidence already before the court in that case, if the facts so warrant, to avoid further harm to the public without delay 3

It thus promotes judicial and administrative economy, in that it avoids the need for a separate administrative adjudicatory proceeding with a duplicate record regarding a contractor';s performance, and possible further judicial review of the same facts by the same (or a different) court all over again.

The Law thus gives the private citizen no effective "administrative remedy" for a scofflaw contractor, and his or her only relief against a contractor for its License Law violations is found only under Bus. & Prof. Code § 7106 and under § 7028.4(2), by way of injunction.4

Nor would the Registrar';s actions or failure to bring a disciplinary proceeding bar such an independent challenge to the license. See, Buzgheia v. Leasco Sierra Grove, supra, 60 Cal. App. 4th at 387-388, distinguishing and criticizing the "alternate holding" in Judson Pacific re exhaustion of "administrative remedies" for lack of citation to any supporting authorities.

And even if a private party had some power to himself initiate administrative disciplinary proceedings on his own behalf, it then would make no sense to also institute separate parallel Section 7106 revocation proceedings in court in addition to an administrative mandamus proceeding, thereby having two judicial proceedings.

Endnotes:

1. The court also held section 7106 did not apply to the issue of whether the licensed was automatically suspended under Bus. & Prof. Code § 7068(b). Ibid at 385-386.
2. Further, a disciplinary proceeding under Section 7090 is one brought by the Registrar of Contractors, not by a private party. Thus there is no alternate administrative remedy or proceeding available for a private party injured by a contractor to institute on his own.
3. A possible explanation for providing the courts with concurrent jurisdiction over licencee disciplinary adjudications can be found in the era when the License Law was first adopted, 1939. Section 7106 was part of that original legislation, as were section 7090 and 7095, which provide for administrative adjudications re license revocations.

Since 1849 California has had a Constitution Separation of Powers Provision, now in Calif. Const. Art III, sec. 3. In the 1930s there were disputes on both the State and Federal government levels as to whether quasi-judicial powers could be constitutionally delegated to administrative agencies. See generally, Administrative Adjudication and Separation of Governmental Powers (1941) 29 Cal. L. Rev. 110, ; Laisne v. California State Board of Optometry (1942) 19 Cal. 2d 831 (discussing separation of powers and mandating de novo hearing in trial court on optometrist';s vested right in license, with Gibson, C.J., dissenting.)

Thus, the alternate judicial remedy was likely adopted as another way to revoke a license, and avoid concerns over the Constitutionality of the administrative adjudicatory procedure.

1. Bus. & Prof. Code § 7028.4 (1) & (2) are further evidence of a public policy of some private enforcement of the License Law "in addition to" the Registrar or other public entity.