Great West Contractors, Inc. v. WSS Industrial Construction, Inc.
Filed April 28, 2008, Second District, B191662

Subcontractor without Corporate License Denied Recovery for Work Performed

WSS Industrial Corporation, Inc., a steel subcontractor, applied for a bid on a public works project at a school for deaf children. At the time of its bid, WSS had not yet obtained a corporate contractor’s license although it had submitted an application. Its license was issued some four months following submission of its bid to Great West Contractors, Inc, the general contractor of the project.

WSS sued general contractor Great West Contractors, Inc., and its surety to recover for work it performed under a subcontract with Great West.

During the jury trial, Great West moved for nonsuit, asserting WSS was barred from recovery by the Construction Services Licensing Law (CSLL) as not duly licensed at all times during its performance.

The trial court denied Great West’s motion, concluding that in any event, licensure was not required for certain tasks WSS performed before its corporate license was issued. In addition, it held that WSS president, Henry Ramirez, held valid individual licenses at all times.

Further, the trial court also held that there was substantial compliance with the licensing during the contract and the work was performed in good faith. As a result, the jury gave a special verdict in favor of WSS.

Consequently, Great West appealed.

During review, the Second District court of appeal reversed the trial court’s decision. The court found that WSS was barred by CSSL neither from maintaining its action nor from getting any recovery or equity based on the following grounds:

• WSS was not duly licensed


• Being unlicensed, it could not satisfy the statutory substantial compliance exception under the law

The court also noted three occasions where WSS performed work even without the corporate license:

• When WSS executed the subcontract, which incorporated its bid proposal, some three weeks before its corporate license was issued, which license expressly stated that it had not existed prior to its date of issue.


• When WSS had invoiced Great West for preparation of shop drawings for work to be completed before the end of that month


• WSS invoiced for work completed to date, including specialized anchor bolts WSS had ordered and had delivered to the project.

The appeals court held that because WSS was unlicensed during some period in which it performed work under the contract, it was barred from maintaining its action if any of the work it did required licensure, or unless it could bring itself within the statutory exception for substantial compliance.

However, WSS contended that the shop drawings prepared before the licensed was issued were bid upon and performed pursuant to the subcontract. WSS also asserted the following facts:

• that those tasks could not be severed from the integrated agreement to avoid CSLL’s bar


• That the shop drawings and anchor-bolt order prefatory tasks that did not require licensure. The public has a right to expect that the maker of plans - whose improper implementation could have serious consequences at a school for deaf children - would, at a minimum, have the qualifications required and possess a valid contractor’s license

Further, the court noted that WSS did not show its substantial compliance with CSLL, since it was previously unlicensed as a corporate entity, and could not rely upon the licensure history of another individual or entity.

CSLL expressly repudiated application of the judicial doctrine of substantial compliance to its provisions.

Under CSLL, the sole exception can only be permitted under the following circumstances:

• if the person could show that he had been properly licensed before his challenged performance


• if he had reasonably and in good faith attempted to maintain licensure


• if he did not know or reasonably should not have known that he was no longer licensed

In ruling, the Second Appellate District therefore reversed the judgment of the trial court, holding that the Construction Services Licensing Law did not permit an unlicensed subcontractor to recover for work performed under a construction services agreement.