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A sole proprietor contractor who uses wrong business name on contract is not barred from seeking payment under license laws

by | Jun 21, 2011 | California Contractor License Law

As all contractors should know, Business and Professions Code section 7031 bars unlicensed contractors from seeking payment for work they have performed. Cases interpreting this law are very strict, and courts have shown little mercy for even seemly small abnormalities in licensure.

For example, a contractor is not deemed licensed unless absolute unity exists between the party who holds the license and the party who enters into the construction contract at issue. In one instance a court barred an unlicensed corporation from seeking payment even though its president and owner held a license in his own name, and manned the project regularly. Opp v. St. Paul Fire & Marine Ins. , 154 Cal.App.4 th 71 (2007). In this situation, the licensed president should have either contracted in his own name or had his license reissued to the corporation. This would have created the requisite unity.

Recently, a project owner sought to have that outcome extended to a sole proprietor contractor who accidently used a wrong business name on his contract. The court refused to do so.

In David E. Ball v. Steadfast-BLK , Case No. C064357 (CA Dist. 3 Ct. App., Jun. 14, 2011) contractor David E. Ball, a sole proprietor, had a “sole owner” license in the name “Clark Heating and Air Conditioning”. The CSLB allows sole owner contractors to put their individual license in the name of a “d.b.a.”. He then contracted to perform work using the name “Clark Air Conditioning and Heating”, apparently accidently transposing the last four words.

Eventually Mr. Ball filed a collection lawsuit. The project owner challenged the claim on the basis that Mr. Ball was unlicensed and therefore barred from seeking payment pursuant to Business and Professions Code section 7031. The trial court agreed, and Mr. Ball appealed.

On appeal the owner pointed to the discrepancy between the names in the contract and on the license, asserting that “Clark Air Conditioning and Heating” (the name in the contract) could not rely on the “Clark Heating and Air Conditioning” license.

The owner argued that this was akin to a corporation entering into a contract in reliance on its owner’s individual license, citing to the Opp case noted above. They also cited code sections mandating that contractors shall not conduct business in more than one name, and must notify the CSLB if they change names. The owner was implying that by using a different business name Mr. Ball was creating a new entity and therefore was obligated to transfer his license to that new name/entity.

The court dismissed these arguments, and reversed the trial court’s decision, to the benefit of Mr. Ball. The court recognized that a fictitious business name (or “d.b.a.”) is not a separate legal entity apart from the individual holding the name, and that while the license was in the name of “Clark Heating and Air Conditioning”, it was in actuality held by Mr. Ball. Accordingly, while the contract was entered into as “Clark Air Conditioning and Heating”, it was in actuality entered into by Mr. Ball. Therefore, sufficient unity existed between the contracting party and the license holder.