Constr. Mgmt. Corp. v. Allied Med. Mgmt. Partners

1

CONSTRUCTION MANAGEMENT CORPORATION, INC., Plaintiff and Appellant, v. ALLIED MEDICAL MANAGEMENT PARTNERS, LLC, et al., Defendants and Respondents.

H049842

California Court of Appeals, Sixth District

July 20, 2023

NOT TO BE PUBLISHED

(Santa Clara County Super. Ct. No. 18CV329849)

Danner, J.

Appellant Construction Management Corporation, Inc. (CMCI) contracted with respondents Allied Medical Management Partners, LLC (Allied) and Evergreen Surgery Center, LLC (Evergreen) to perform construction work at a medical office building in San Jose (projects). After CMCI finished its work on the projects, Allied and Evergreen withheld retention payments^[1] that CMCI claimed were due for completed work.

CMCI sued Allied and Evergreen, alleging breach of contract and other causes of action. Allied and Evergreen moved for summary judgment based on evidence that CMCI was unlicensed for 49 days during its work on the projects and therefore its causes of action were barred by Business and Professions Code section 7031, subdivision (a)^[2](hereafter section 7031(a)). The trial court agreed, granted summary judgment, and entered judgment in favor of Allied and Evergreen.

On appeal, CMCI contends that the trial court erred in concluding that there were no triable issues of fact or law regarding the status of CMCI's contractor's license by failing to hold an evidentiary hearing, and in denying CMCI's request for judicial notice of the Contractors' State License Board (Board)'s file regarding CMCI's license. In addition, based on newly obtained documents presented to this court with a motion for judicial notice, CMCI contends that "its apparent non-licensure" while working for Allied and Evergreen was caused by an "error of the [Board]," which the Board has now "admitted" and "corrected," further demonstrating that CMCI had substantially complied with all licensing requirements during the relevant period.

For the reasons explained below, we reverse the judgment and remand the matter to the trial court with directions to vacate the order granting summary judgment and to conduct further proceedings consistent with this opinion.

I. FACTS AND PROCEDURAL BACKGROUND

A. Background to Summary Judgment Motion

1. Contract, Complaint, Depositions, and Declarations

On or about December 12, 2014, CMCI and Evergreen entered into a written agreement for CMCI to perform construction work at a building in San Jose for the price of $949,465 (Evergreen project). CMCI's representative, Bruce Russo (Russo), signed the agreement, and CMCI completed its work on the Evergreen project between December 12, 2014, and February 2017.

On or about August 4, 2015, CMCI and Allied entered into a written agreement for CMCI to perform construction work at the same San Jose building for the price of $1,302,319 (Allied project). Russo signed the agreement for CMCI, and CMCI completed its work on the Allied project between August 4, 2015, and February 2017.

About 16 months after CMCI's work on the projects ended, CMCI filed the instant action against Allied and Evergreen in June 2018. In its complaint, CMCI alleged four causes of action against Allied (designated as first through fourth) and four causes of action against Evergreen (designated as fifth through eighth). The causes of action against Allied and Evergreen included (1) breach of contract (first &fifth), (2) quantum meruit (second &sixth), (3) open book account (third &seventh), and (4) prompt payment penalties for due retention (Civ. Code, § 8818) (fourth &eighth). Additionally, the complaint alleged that CMCI was "engaged in the business of general contracting" and "was at all relevant times licensed by the California State Contractors' License Board to perform the acts alleged" in the complaint. The complaint prayed for $180,042.43 in damages on the causes of action against Allied and $121,062.63 in damages on the causes of action against Evergreen.

In August 2018, represented jointly by a single counsel, Allied and Evergreen answered the complaint and alleged 12 affirmative defenses, including that CMCI "is not a licensed contractor under California Law and not entitled to recover money for work performed for [Allied and Evergreen]."

At a deposition on February 14, 2019 (February 2019 deposition), upon questioning by Allied and Evergreen's counsel, Russo testified as follows about CMCI's contractor's license:

"Q. All right. Now, isn't it true that Construction Management Corporation's license expired in June of 2016?

"A. Not that I'm aware of.

"Q. And that would be the first time you ever heard of it if that were true?

"A. Yeah. That would be true."

When Allied and Evergreen's counsel next asked if a license expiration date of June 30, 2016 "would not be true," Russo stated, "Not to my knowledge." Counsel then showed Russo a Board document that listed CMCI's license history and indicated that CMCI's license had expired on June 30, 2016. Russo responded to this document by saying, "I see it[,] but I don't believe it." After counsel again noted the June 2016 expiration date, as well as an August 18, 2016 renewal date listed in the license history, and further asserted that CMCI was an unlicensed contractor, Russo said he had "some idea" what that meant. When counsel asked Russo if he understood that he had done "construction work under an expired license" for a period of 49 days, Russo responded, "I don't believe it, but I see what it says here."

At a deposition on October 13, 2020 (October 2020 deposition), Luigi Delucchi, the CEO of Construction Loan Monitoring Group (CLM Group), testified that he had overseen the Evergreen project and Allied project for two banks that lent funds for the projects. At some point during CLM Group's oversight of those projects, Delucchi learned from his "process manager" that CMCI had become unlicensed as a general contractor. As a result, payment from the lenders to CMCI "was just frozen." Delucchi testified further that, during a meeting held "at the construction site" in San Jose, the licensure issue was discussed with Russo. Delucchi believed that Russo knew prior to the meeting that the lenders could not make further payments to CMCI because of the licensure issue. Delucchi testified that Russo never contacted anyone at CLM Group "about a resolution with regard to his license issue." Delucchi testified further that he "absolutely would never tell anybody to pay an unlicensed contractor. There's a lot of previous litigation since 2006 about paying unlicensed contractors." When asked next if he had told Allied and Evergreen "that," Delucchi answered "Yes."

In an August 2021 declaration, Evergreen's manager Hector Cervantes declared that "[n]ear the end of construction," Evergreen learned from CLM Group and Delucchi that CMCI was unlicensed. Delucchi advised that "the bank would not approve payment to an unlicensed contractor and that unlicensed contractors are not entitled to be paid for construction work performed." "Delucchi advised [Cervantes] not to pay CMCI because its contractor's license had expired. Based on the advice from Delucchi, and because [Cervantes] understood that unlicensed contractors are not entitled to be paid, Evergreen . . . withheld payment of retention to CMCI." Cervantes further declared that "[a]t no point were we informed CMCI had reinstated its license, and I was told that even if CMCI reinstated its license, the lapse of license during construction justified withholding payment."

Likewise, in August 2021, Allied's manager, Dr. Donald Siao, executed a declaration that provided information regarding Allied identical to that provided by Cervantes in his declaration about Evergreen.

2. Allied and Evergreen's Motion for Summary Judgment/Summary Adjudication and Request for Judicial Notice

In August 2021, Allied and Evergreen moved for summary judgment or, in the alternative, summary adjudication of the fourth and eighth causes of action for prompt payment penalties (motion). In support of their motion, Allied and Evergreen filed a declaration from their counsel with attached exhibits that included excerpts of Russo's February 2019 deposition and Delucchi's October 2020 deposition, Cervantes's August 2021 declaration, Dr. Siao's August 2021 declaration, and a separate statement of undisputed facts.

Concurrently with their motion, Allied and Evergreen requested that the trial court take judicial notice of CMCI contractor's license history as produced and certified by the Board on August 20, 2018 (August 2018 license history). The August 2018 license history covered the period September 1, 2014, to August 20, 2018. It indicated that CMCI was a "B General Building Contractor" and listed two personnel for CMCI, "Bruce Roberts Russo, RMO" (i.e., responsible managing officer^[3]) and "Marianne Patricia Russo, Officer."^[4] The August 2018 license history also provided the following information about CMCI's license in a section titled "History": "09/01/14 In Effect [¶] 06/30/16 Expired [¶] 08/18/16 Renewed [¶] 10/01/17 Suspended [section] 7125.2 (Workers' Compensation) [¶] 10/05/17 Suspended [Code of Civil Procedure section] 996.340 (Contractor's Bond) [¶] 10/23/17 Suspended [section] 7071.11 (Bond Payment of Claim #60432) [¶] 06/30/18 Expired Under Suspensions* [¶] 08/20/18 Expiration &[section] 7071.11 Suspension Still In Effect." (Italics added.) In a section titled "Additional Information," the August 2018 license history stated, "This license expired 06/30/18 and has not been in effect since that date." (As stated above, CMCI had completed its work on both projects in February 2017.)

In their motion, Allied and Evergreen asserted that summary judgment of the entire action was proper "because under California law a...