Contractor Licensing Law: The High Price Of Being An Unlicensed Contractor
By Aaron Flores, Esq.
California courts strictly enforce the disgorgement provisions of the contractor licensing law. A new California case underscores this reality. In Twenty-Nine Palms Enterprises Corporation v. Paul Bardos the California Court of Appeal upheld a trial court ruling which ordered an unlicensed contractor to return (“disgorge”) over $750,000 back to the project owner.
In February 2007, Twenty-Nine Palms Enterprises Corporation (“Palms”), a tribal corporation, undertook construction improvements to the Spotlight 29 Casino. Palms hired Paul Bardos as its construction manager. Palms also hired the Worth Group as its general contractor. Worth Group submitted a bid to Palms in excess of $1.7 million for a portion of the work. At the request of Palms, Bardos submitted his own bid for approximately $750,000 to perform the same work. Palms accepted Bardos’ bid and requested that he perform the work under a different name to hide the fact that Palms was awarding the contract to Bardos, Palms’ current construction manager. Bardos agreed and created Cadmus Construction Co. (“Cadmus”) to perform the work. Cadmus completed its work in June 2007 and subsequently obtained its contractor’s license in October 2007. Palms thereafter sued Cadmus to recover all monies it paid to Cadmus as an unlicensed contractor. Palms prevailed and Cadmus was ordered to return all monies it had received for the work.
On appeal, the court rejected Cadmus’ argument that the contractor licensing laws did not apply since the work was performed on tribal land. The court also rejected Cadmus’ equitable arguments, notwithstanding the fact that Palms told Cadmus it did not need to be licensed. The court held that equity cannot circumvent the licensing requirements. The Court of Appeal therefore affirmed the trial court, ordering Cadmus to return all monies paid to it by Palms – a disgorgement in excess of $750,000.
Twenty-Nine Palms Enterprises Corporation v. Paul Bardos is the most recent case to reinforce the serious consequences for failing to comply with California’s contractor licensing laws. Given the outcome of this case, the price of being an unlicensed contractor in California does not appear to be getting any cheaper.
Aaron Flores is an Associate Attorney with Hunt Ortmann, a leader in California construction law.