Where There’s Construction, There’s Litigation-How to Survive the Battle

Where There’s Construction, There’s Litigation-How to Survive the Battle

By Pamela J. Scholefield, Esq.

This may not be true with every project, but the construction industry is – and always has been – a hotbed of litigation. This is an unfortunate aspect of construction in America. Once a construction dispute starts to snowball downhill, it tends to take with it any and all persons that touched the project, even the engineers and architects. Heading towards litigation is almost a guarantee that the road will be rough and loaded with traps for the unwary.

Three Way Tie
Regardless of the type of project - a custom home, commercial building, wastewater treatment plant, power distribution system, or a highway system – there are three common levels of participation: owners, design professionals, and builders/contractors. What tie them all together are the contractual relationships and legal obligations between the parties. From an overall project standpoint, each player’s input has a direct affect on the other two. An owner provides funding. A design professional creates detailed and buildable plans. A contractor turns the vision into reality. If any of the three participants do not perform, they can doom a project. It is truly a symbiotic relationship.

Red Flag Warnings
The first clue that something may be going wrong is that one of the parties starts documenting everything. Red flags should go up when notices start appearing frequently. Don’t ignore them. It may just be a sudden surge in project management discipline, but be skeptical and expect the worst, here’s why:

He (or She) With the Best Documentation Wins
With the ease of email, there is no excuse as to why you can’t shoot off a quick email to confirm an oral decision that is made at a meeting or during a teleconference. Don’t rely on other people or requests-for-information to document the story. There are too many decisions that are made on the fly, at job site meetings, and in teleconferences that are not tied to any specific RFI. These meeting notes and emails may end up being critical pieces of evidence if something is delayed, built wrong, or costs more.

Just the Facts
It is extremely important to remember when sending emails to avoid making personal opinions, such as the state of the project or frustrations with workmates, contractors, etc. Your personal opinions often become your professional opinions by opposing parties. Don’t expect privacy, and write as if your emails will be reviewed by a judge – no sarcasm, no derogatory remarks, no slamming the owner, engineer or contractors, and – above all – no admissions that you, or anyone who works with you or for you, have done anything wrong! These rules should apply even with your own internal emails. We have heard how internal emails can provide the “smoking gun” that wins or loses a case.

This goes beyond emails and other written communications, so think before you speak as well. The rules for emails should also apply to any oral communications or conversations you have with anyone throughout the project. Remember, your litigation opponent-to-be may be documenting these impromptu meetings as well.

The Best Defense is A Good Offense
The bottom line is that a good defense begins with a good offense. And, you may find yourself taking the stand and answering questions about a project 2 or 3 years after the project’s completion. Knowing this now may make your life easier when you are testifying. So, as a minimum, you should adopt the following as standard procedures for doing business:

1. Document all meetings and then forward to all attendees for review. If you are an attendee and you receive meeting minutes that you believe to be incorrect, make your changes known in writing and forward to all attendees.
2. Document all informal meetings, such as jobsite walks or impromptu discussions. All you may need is something as simple as an email summary of what was discussed.
3. Keep a paper copy of all electronic correspondence. Don’t let emails get deleted before printing out copies.
4. Take plenty of photos when you walk the site. Note the dates when taken. Copy them to CD’s for archiving.
5. Handle RFI’s promptly. Keep an accurate and updated RFI log.
6. Handle submittals promptly. Keep an accurate and updated submittal log.
7. Date-stamp all correspondence you receive, from any source.
8. Document communications with engineers, utility personnel, suppliers, consultants, construction managers and project managers, etc.
9. Document all attempts at communications; use phone logs for conversations, sent and received, and voice messages. Set your fax machine to print out confirmations and keep failed fax transmissions. Keep a copy of returned email deliveries.
10. Document the dates that plan revisions are issued and request a delivery receipt from all recipients if you are the issuer. Require that all revisions on plans be noted and clouded in.
11. If appropriate, keep a daily jobsite journal with as much detail as possible even if not required.
12. Document and retain all calculations used for the project, such as engineering, labor, material, or down-time estimates. This will help support any claims.

Better Safe than Sorry
Some of you may think that all this is overkill for smaller projects, but you’re going to wish you had done this if you’re ever caught in the middle of a construction lawsuit – regardless of the value of the project. Plus, the better documentation you have, the easier it is for your attorney to represent you. Making your attorney’s job easier will reduce your legal bills in the long run. And, most people find that litigation creates quite a bit of unwanted personal stress. So, the better your defense, the less stress you will suffer as you wind your way through the long process of litigation. Nothing you do will make litigation enjoyable, but at least you will know you are in the best possible position to defend yourself when needed.
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To Lien or Not to Lien…that is the question

To Lien or Not to Lien…that is the question

By Pamela J. Scholefield, Esq.

Question: Our company is a construction equipment rental company. Some of our equipment was leased by a contractor to use for a meat packing plant expansion. The expansion also includes relocating the plant’s emergency power system. The contractor rented from us various items such as a backhoe, emergency generators, and site fencing. The contractor has fallen way behind in making payments for the rented equipment. We provided the 20-day preliminary notice as required for this project when we first sent the equipment out. Can we record a mechanic’s lien to protect our rights to payment?

Answer: The right to a mechanic’s lien for persons supplying labor, services, equipment, or materials to improve property is vested in the California Constitution. The public policy behind liens is to prevent a property owner from being unjustly enriched by the value added to their land if the one who supplied the labor, services, equipment, or materials for that increased value went unpaid. But, it is not always easy to figure out who, exactly, has lien rights and your seemingly simple question, unfortunately, cannot be answered with a “yes” or “no.”

Per Civil Code, section 3116, you can file a mechanic’s lien after you have “ceased furnishing labor, services, equipment, or materials” to the project. So the first question is whether or not your company is still leasing its equipment to the site. Assuming that you’ve retrieved your equipment, we have to assume that the project is ongoing or, if not, that the time to record a lien has not expired. That is subject of another question.

Next, we have to consider each piece of equipment your are supplying and determine whether or not it was “used or consumed” in the “work of improvement.” (Civil Code, section 3110). Court cases analyzing this statute have held that the word “used” means actually and directly used to improve the property and increase the property’s value.

The leasing of the backhoe would most likely entitled you to lien the property for the rental charges that have not been paid for that piece of equipment. The backhoe was used for earthwork that altered the property. Thus, the backhoe was used in the work of improvement, meaning it was used to directly improve the property.

On the other hand, site fencing is usually not an item that would entitle a rental company to lien rights. The fence may have been required by contract, insurance or even local ordinance, and was actually in place during the construction work. Without the fencing in place, the contractor probably would not have been allowed to proceed with the construction work. So, there is no doubt that the fencing was a necessary element in completing the work of improvement. But, the fence was constructed solely for security and liability purposes. It is temporary and does not, itself, directly improve and add value to the property.

The emergency generators are another issue all together. In some instances, a generator may be used to supply power to a jobsite in order to power up various tools being used to perform construction work. Wouldn’t that be similar enough to the backhoe? Each piece of equipment, while not permanently installed on the land, was actually used to improve the property. But, if the generator, or backhoe, was delivered to the jobsite and left there for the duration of the leased time, but for some reason sat idle and was never used, there would be a strong argument that the rental company does not have lien rights in that situation because the equipment was never actually used to improve the property.

By your question, it would seem that the emergency generators were rented to be on site for the purpose of supplying backup power to the existing operations just in case the normal utility power failed during the time the plant’s emergency power system was being relocated. If that is the case, then how would those generators, themselves, be adding value to the property? In this case, aren’t more like the fencing? They are needed in order for the project to go forward. But, the generators not actually and directly used in the actual work of improvement – they are not being used to enhance the value of the property.

As you see, mechanic’s lien rights are not very straightforward. The California Law Review Commission (CLRC) has been wrestling with this issue for some time and is currently in the process of revamping the mechanic’s lien laws in order to provide clarity as to who is entitled to a lien. Those of us in the construction industry are eager for any guidance these new laws will provide.

General Disclaimer
The information in this article is based upon California law and is for general information only. Any scenarios or hypotheticals are provided only to illustrate laws and legal principals in general. Any information or analysis presented here is intended solely to inform and educate the reader on general issues. Nothing presented or referenced to, regarding facts, documents, or applicable laws, constitutes legal advice. Before acting or relying on any information, including any information presented here, consult with a qualified attorney for your specific situation.

A New Year Brings New Laws for Contractors

A New Year Brings New Laws for Contractors

Fortunately, 2008 brings with it only a few changes to the laws that will affect the construction industry as a whole. Plus, one new law that affects virtually everyone that drives and uses a cell phone – we’ll discuss this one first.

Motor Vehicle Code §23123 – Hands-Free for Cell Phones
This new law restricts the use of mobile phones while operating a motor vehicle and takes effect on July 1, 2008. The law requires most drivers to use hands-free device while using a wireless telephone while driving a vehicle. There are exceptions for emergency use, tow trucks, farm vehicles, large commercial vehicles, and operating vehicles while on private property.
(See http://www.dmv.ca.gov/cellularphonelaws/ for DMV’s explanation).

There have been recent press releases that say that the use of the two-way radio, walkie-talkie like feature on a cell phone (like that provided by Nextel) is still allowed, but that is not the case. The exemption allowing the use of two-way radios applies only to specific vehicles, which does not include a pickup truck, despite that truck being registered and used exclusively for commercial purposes. The exemption does apply to a motor truck (think moving van) or a truck tractor (big-rig or semi tractor-trailer) that require either a commercial class A or class B driver's license to operate.

Business & Professions Code §125.6 – Anti-Discrimination
A licensed contractor will face disciplinary action if they discriminate by refusing construction-related services based upon a prospective client’s medical condition or sexual orientation. This expands the existing law providing disciplinary action against licensees for refusing services based upon race, color, sex, religion, ancestry, disability, marital status, or national origin of a prospective client.

Business & Professions Code §7026.11 – Mobile/Manufactured Homes
Because health and Safety laws now provide separate and distinct definitions for the terms “mobile home” and “manufactured home”, the Contractors State License laws had to be amended to allow for a General Manufactured Housing (C-47) classification to continue to be the appropriate specialty license for performing work relative to both mobile homes and manufactured housing.

Business & Professions Code §7027.5 – Expanded Scope for Landscape Contractors
Landscape Contractors (C-27 license) are authorized to enter into prime contracts for residential landscape projects that include the construction and installation of fireplaces (that are not attached to the dwelling) or outdoor cooking centers, as long as any work beyond the scope of the landscape contractor’s licensing is subcontracted out to appropriate specialty contractors or a licensed general contractor.

Business & Professions Code §7083.1 – Expired or Cancelled Licenses
A contractor whose license is expired, suspended and renewable, or canceled, must keep current his or her address of record with the Contractors State Licensing Board for a five-year period immediately following the expiration, suspension or cancellation of their license.

Business & Professions Code §7091 – Statute of Limitations for Disciplinary Actions
If a licensee is convicted of a crime that is substantially related to the qualifications, functions or duties of a contractor, the CSLB will have two (2) years from the date the conviction is discovered in which to file disciplinary action against the licensee. Also, the CSLB will have 18 months after the date a warranty expires in which to file a disciplinary action against a licensee who fails to honor the terms of the warranty.

Business & Professions Code §7114 – Payment of Money for Aiding Unlicensed Contractor
As part of disciplinary action against a licensee, the Registrar of Contractors is authorized to order a licensee to pay a specific amount of money to an injured party if the licensee has aided an unlicensed person or allowed an unlicensed person to use his or her license.

Business & Professions Code §7159.5 – Home Improvement Contracts
Parts of this statute have been revised to as follows: Contractors who provide and register payment and performance bonds need not include some of the language normally required for home improvement contracts. Also, this revised statute sets specific time frames for the running of statutes of limitations to bring criminal charges against contractors who violate certain provisions of the home improvement contracts statutes.

Business & Professions Code §7159.14 – Service and Repair Contracts
This amended statute clarifies statutes of limitation for bringing criminal charges against contractors who violate the requirements for Service and Repair home improvement contracts.

Civil Code §2782 – Subcontractor Indemnity
A new subsection added to this statute voids residential building contract provisions that attempt to make the subcontractor responsible (by way of indemnification) for construction defects claims that arise out of the negligence or design defects of the general contractor. But, this new subsection applies only to general contractors who are “unaffiliated” with the builder. This means that, in order for this safeguard for the subcontractor to apply, the general contractor must be an independent from the builder, meaning it can’t be a partner, member of, or subsidiary of the builder.

Insurance Code §11760.1 – Audit Penalties
This new statute provides that if, after three requests, an employer fails to allow an insurance company, or its representative, access to its records in order to perform a workers’ compensation audit, the employer may be liable to pay the insurance company three (3) times the total annual premium, plus associated costs.

Pam Scholefield-Key Speaker at Rebuild San Diego Fire Victim workshop

Pam Scholefield was key speaker at the November 16th REBUILD SAN DIEGO fire victim workshop in Escondido.

This event, a volunteer driven and supported workshop was the brainchild of Mike Caples, of Contractor News and Views. Ms. Scholefield immediately agreed to be a participant in order to help the fire victims.

The information sessions were at times "standing room only" and gave the fire victims insight and needed information from local governmental agencies and private supporters such as Scholefield Associates, P.C. In addition to the information sessions, there was an exhibit hall that consisted of licensed contractors (whose credentials were checked prior to their exhibiting), governmental organizations, trade groups such as the National Electrical Contractors Association, and even a fire survivors group from the Cedar fires in 2003.

Ms. Scholefield spoke about the need to understand all the contract terms and conditions, the dangers of using unlicensed contractors and even the risks of using an owner-builder consultant. Typically, there was not enough time for the homeowners to really get detailed answers to their questions, but the event exposed these people to the magnitude of their rebuilding process.

The event was broadcast live on KOGO's Roger Hedgcock's radio show, which gave those individuals interested, but unable to attend, a taste of what they were missing.

"Hopefully all the attendees came away with something useful for their rebuilding process" said Scholefield.

About Scholefield Associates, P.C.
A construction law litigation firm, that represents developers, contractors and material suppliers in private and public works and handles contract negotiations, contract disputes, delay claims, scope of work, mechanics’ liens, prevailing wage requirements, and construction specific licensing and business formations. Founded in 1998, the firm's San Diego office has developed a reputation as an extremely qualified, high performance boutique law firm. More about the firm can be found on its Web site:www.construction-laws.com

Scholefield Associates to be a Featured Speaker at Workshop to Help Fire Victims

Scholefield Associates to be a Featured Speaker at Workshop to Help Fire Victims
San Diego, Calif., November 02, San Diego based construction law firm, Scholefield Associates, P.C. has volunteered to be a featured speaker at a local workshop to help contractors and fire victims survive the rebuilding process. This is a chance for contractors as well as homeowners to ask legal questions before they have problems.
“We don’t want people to re-live the problems created after the 2003 Cedar fire”, says Pam Scholefield, the firm’s lead attorney. “We want people to learn from past mistakes.” With the Cedar fire experience behind her, Scholefield hopes to educate contractors and homeowners on the legalities of the construction process. She will be available at SAN DIEGO REBUILDS! on Nov. 16th from 2:30 p.m. to 6:30 p.m. to discuss construction contracts, and to offer tips on what contractors and homeowners can do to assure a smooth and trouble free job. Some of these same tips will also help to expose the anticipated onslaught of construction scam artists who prey on disaster victims. Ms. Scholefield is proud to be selected as a speaker at this event and is excited to be able to give back to the community in positive ways.
SAN DIEGO REBUILDS!, is a one time event to be held at the California Center for the Arts in Escondido to connect fire victims with experts from local building departments, the Contractors State Licensing Board (CSLB), the BBB, qualified attorneys, insurance, tax and lending professionals, architects, construction contractors and a variety of material suppliers. Many of San Diego’s construction trade groups are also participating.
In addition, Congressmen Brian Bilbray, Darrell Issa and Duncan Hunter, Governor Arnold Schwarzenegger, State legislators Mark Wyland, George Plescia, Lori Saldana, Joel Anderson and Dennis Hollingsworth, County Supervisors Pam Slater-Price and Bill Horn, Escondido Mayor Lori Holt Pfeiler, and the San Diego District Attorney Bonnie Dumanis have all been invited to pledge their support and participation in this event.
Roger Hedgcock, a San Diego radio personality on KOGO will broadcast this event live as a public service.
More information about SAN DIEGO REBUILDS! can be found on the event website: www.sandiegorebuilds.com.
About Scholefield Associates, P.C.
A construction law litigation firm, that represents developers, contractors and material suppliers in private and public works and handles contract negotiations, contract disputes, delay claims, scope of work, mechanics’ liens, prevailing wage requirements, and construction specific licensing and business formations. Founded in 1998, the firm's San Diego office has developed a reputation as an extremely qualified, high performance boutique law firm. More about the firm can be found on its Web site: www.construction-laws.com

How Can Local Contractors Keep From Getting “Burned” by the San Diego Wildfires?

How Can Local Contractors Keep From Getting “Burned” by the San Diego Wildfires?


San Diego, Calif., October 24, San Diego based construction law firm, Scholefield Associates, P.C. has created a list of 10 “do’s and don’t’s” to help contractors survive the post-wildfire rebuilding process.


As the wildfires continue to rage on, there are many victims who have returned home and are beginning to assess their damage. It is predicted that the region will be flooded with out-of-state or unlicensed people posing as contractors. It is illegal and punishable as a felony to perform contracting work in a declared disaster area without a California contractor's license. Punishment may include a fine of up to $10,000 or up to 16 months in state prison. While the results of the wildfires will stimulate a flurry of new construction activity, it will also open the doors for con artists.


“Because of the problems we saw during the 2003 Cedar fires, we want to help keep licensed contractors from getting into problems with homeowners and contracting laws”, said Pamela Scholefield, the firm’s lead attorney. “We also want to let the contractors know that they can help educate the homeowners to stay away from the fly-by-night scam artists.”
Scholefield Associates has provided a list of things that contractors should do in order to put the homeowner’s mind at ease. A licensed contractor should be upfront with homeowners and offer as much information as possible. “Don’t try to hide anything or appear to be anything less than legitimate”, added Scholefield. It is recommended that as a minimum, be sure to do the following:


1. Make sure your license is up to date before performing any work and show a copy of your license as evidence that you are a licensed contractor.
a. Bring along copies of the most recent Contractor State License Board (CSLB) information page. Encourage the homeowner to go online themselves to confirm this.
b. Show that all pertinent information is accurate, such as the statutory bond and workers compensation insurance.
c. For Home Improvement Salespeople, encourage the homeowner to call the company telephone number listed on the CSLB page to confirm your employment with the contractor.

2. Provide names and telephone numbers of qualified references such as previous customers and encourage the homeowner to call these people and speak with them.

3. Be sure your contracts are in compliance Contractor State License laws, for example:
a. Don’t take more than 10% down or $1000, whichever is less.
b. Don’t take any more payments than the value of the work done.
c. Do only work that you are licensed to do.

4. Do not let anyone “borrow” your license to allow them to get work. This is illegal, both for you and for the person who is not authorized to use your license.

5. Provide a WRITTEN quote detailing the exact work to be performed, the exact cost for the work, the date the work will begin, and the time it will take to complete the work and the payment schedule expect.

6. Don’t make promises that you cannot keep, such as start and completion dates.

7. Don’t gouge the homeowners. It is illegal to charge more that 10% of your usual rates when doing work caused by disasters.

8. Be sure to tell the homeowners that the typical scam used by an illegal contractor to use the license number of a licensed contractor, collect a hefty cash deposit and then disappear.

9. Emphasize to a homeowner that only licensed contractors are legally allowed to perform work valued over $500, and that anyone else offering to do any work is breaking the law.

10. Make sure the homeowner appropriate funding is in place for your work
a. Recommend that a fund control be established to ensure prompt payment.


As a contractor, if you are unsure about any of the above referenced suggestions, or are unsure of your legal responsibilities; contact a qualified construction lawyer before entering into any contract.

About Scholefield Associates, P.C.
A construction law litigation firm, that represents developers, contractors and material suppliers in private and public works and handles contract negotiations, contract disputes, delay claims, scope of work, mechanics’ liens, prevailing wage requirements, and construction specific licensing and business formations. Founded in 1998, the firm's San Diego office has developed a reputation as an extremely qualified, high performance boutique law firm. More about the firm can be found on its Web site: www.construction-laws.com

Contact: Bryan Weaver, Mgr. Business Development, Scholefield Associates, P.C. 619-544-0086 xt105 or bryan@construction-laws.com

How Can Local Contractors Keep From Getting “Burned” by the San Diego Wildfires?

For Immediate Release Contact: Bryan Weaver
October 24, 2007 Business Development
619-544-0086
bryan@construction-laws.com
How Can Local Contractors Keep From Getting “Burned” by the San Diego Wildfires?
San Diego, Calif., October 24, San Diego based construction law firm, Scholefield Associates, P.C. has created a list of 10 “do’s and don’t’s” to help contractors survive the post-wildfire rebuilding process.
As the wildfires continue to rage on, there are many victims who have returned home and are beginning to assess their damage. It is predicted that the region will be flooded with out-of-state or unlicensed people posing as contractors. It is illegal and punishable as a felony to perform contracting work in a declared disaster area without a California contractor's license. Punishment may include a fine of up to $10,000 or up to 16 months in state prison. While the results of the wildfires will stimulate a flurry of new construction activity, it will also open the doors for con artists.
“Because of the problems we saw during the 2003 Cedar fires, we want to help keep licensed contractors from getting into problems with homeowners and contracting laws”, said Pamela Scholefield, the firm’s lead attorney. “We also want to let the contractors know that they can help educate the homeowners to stay away from the fly-by-night scam artists.”
Scholefield Associates has provided a list of things that contractors should do in order to put the homeowner’s mind at ease. A licensed contractor should be upfront with homeowners and offer as much information as possible. “Don’t try to hide anything or appear to be anything less than legitimate”, added Scholefield. It is recommended that as a minimum, be sure to do the following:
1. Make sure your license is up to date before performing any work and show a copy of your license as evidence that you are a licensed contractor.
a. Bring along copies of the most recent Contractor State License Board (CSLB) information page. Encourage the homeowner to go online themselves to confirm this.
b. Show that all pertinent information is accurate, such as the statutory bond and workers compensation insurance.
c. For Home Improvement Salespeople, encourage the homeowner to call the company telephone number listed on the CSLB page to confirm your employment with the contractor.
2. Provide names and telephone numbers of qualified references such as previous customers and encourage the homeowner to call these people and speak with them.
3. Be sure your contracts are in compliance Contractor State License laws, for example:
a. Don’t take more than 10% down or $1000, whichever is less.
b. Don’t take any more payments than the value of the work done.
c. Do only work that you are licensed to do.
4. Do not let anyone “borrow” your license to allow them to get work. This is illegal, both for you and for the person who is not authorized to use your license.
5. Provide a WRITTEN quote detailing the exact work to be performed, the exact cost for the work, the date the work will begin, and the time it will take to complete the work and the payment schedule expect.
6. Don’t make promises that you cannot keep, such as start and completion dates.
7. Don’t gouge the homeowners. It is illegal to charge more that 10% of your usual rates when doing work caused by disasters.
8. Be sure to tell the homeowners that the typical scam used by an illegal contractor to use the license number of a licensed contractor, collect a hefty cash deposit and then disappear.
9. Emphasize to a homeowner that only licensed contractors are legally allowed to perform work valued over $500, and that anyone else offering to do any work is breaking the law.
10. Make sure the homeowner appropriate funding is in place for your work
a. Recommend that a fund control be established to ensure prompt payment.
As a contractor, if you are unsure about any of the above referenced suggestions, or are unsure of your legal responsibilities; contact a qualified construction lawyer before entering into any contract.

About Scholefield Associates, P.C.
A construction law litigation firm, that represents developers, contractors and material suppliers in private and public works and handles contract negotiations, contract disputes, delay claims, scope of work, mechanics’ liens, prevailing wage requirements, and construction specific licensing and business formations. Founded in 1998, the firm's San Diego office has developed a reputation as an extremely qualified, high performance boutique law firm. More about the firm can be found on its Web site: www.construction-laws.com

Contact: Bryan Weaver, Mgr. Business Development, Scholefield Associates, P.C. 619-544-0086 xt105 or bryan@construction-laws.com

San Diego Daily Transcript presents San Diego' s Top Attorneys 2007

The San Diego Daily Transcript has posted all of San Diego's Top Attorneys for 2007. This is a culmination of votes tabulated by each attorney's peers within each practice group. Scholefield Associates Pam Scholefield has been selected as one of the Top Attorneys in Construction law Litigation. Go to this link to see the write-up on Ms. Scholefield http://www.sddt.com/microsite/topattorney2/nominee.cfm?nom=2824f928

Unlicensed Contractors in California are NOT entitled to Compensation

The Hydrotech case confirms that contractors who do work without a license are not entitled to compensation for work performed. In fact, the unlicensed contractors are obligated to disgorge all the money that they may have received for working without a license. Because the Hydrotech case is a few years old, the "substantial compliance" exception may be treated differently today.

A typical example: A custom cabinet shop makes made to order kitchen cabinets. When the cabinets are completed, they have to be installed. The cabinet shop, which does not have a contractors license, and does not need a contractors license to fabricate cabinets, contracts with a licensed contractor to install the finished cabinets. As expected, the cabinet shop pays the installer for their services. The cabinet shop then bills the customer for both the cabinets and the installation labor. The cabinet shop is contracting without a license. Why? Because they were acting in the capacity of a general contractor, even though they hired a licensed installer to perform the work. The cabinet shop will have to disgorge all the money collected for both the cabinets and the labor. This actually happened and is not just a hypothetical example. The cabinet maker had to pay back the customer for the total cost of the cabinets and labor, and the customer got to keep the cabinets. The cabinet maker should have done one of two things; let the customer contract directly with the installer (losing any mark-up he could have gotten on the installation supervision), or obtain a contractors license to either act as a general contractor or self perform the installation.

Hydrotech Systems, Ltd. v. Oasis Waterpark, 52 Cal. 3d 988
--In an action by an out-of-state subcontractor to recover for labor and materials supplied on a construction project, the trial court properly sustained defendant project owners' demurrer as to the subcontractor's contract causes of action, because the subcontractor had failed to obtain a license as required by Bus. & Prof. Code, § 7031. Section 7031 bars all actions that seek compensation for unlicensed contract work. Exceptions have been allowed for contractors who have substantially complied with licensing regulations, but the subcontractor had made no effort to obtain favorable official determination of its qualifications. Also, § 7031 applied notwithstanding the subcontractor's claim that it had provided a unique service (a wavemaking machine), and had engaged in one isolated transaction in California. Section 7031 applies to construction projects whether unique or not, and bars subcontractors as well as contractors from suing to collect on any contract for which a license is required, regardless whether performance of the contract is an isolated transaction.

Pam Scholefield selected as on of San Diego's top Construction Attorneys

Attorney Pam Scholefield has been selected by her fellow attorneys as one of San Diego's top attorneys in the real estate and construction litigation categories. The San Diego Daily Transcript hosts this event every year, and only attorneys are allowed to cast their vote for who they feel are the best in each category.

A reception will be held July 26th to honor the award recipients.

Pam Scholefield selected for AIA seminars

Pam Scholefield was selected to be part of the faculty for "AIA CONTRACTS", an in-depth educational seminar held by Lorman Education Services, a respected national seminar company.

AIA CONTRACTS is to be held in San Diego on January 17, 2006, and will be an opportunity for attendees to gain an understanding of the most current information on AIA contracts and how the changes can affect contractors. The faculty is made up of industry professionals and experienced practitioners with an expertise in AIA construction contracts.

Ms. Scholefield is honored to be a member of the faculty for this event and feels that this is an excellent chance for contractors to be able to have their questions answered by a panel of seasoned professionals.

For those interested in this seminar, contact www.lorman.com