Contractors: Your Business Name Could Make The Difference
By Wahid Guirguis, Esq.
In recent years, the courts have issued a number of decisions that have been hard on contractors. The Court of Appeal finally backs off that trend in Ball v. Steadfast-BLK (June 14, 2011) 2011 Cal. App. LEXIS 736. As background, California Licensing Law, particularly Business and Professions Code § 7031(a) as interpreted by the Court, "...bars all actions, however they are characterized, which effectively seek ‘compensation’ for illegal unlicensed contract work". In the Ball case, the issue revolved around two words in the contractor's name that were transposed in the contracts with owners.
Ball was a licensed contractor whose license was issued by the Contractors State License Board (CSLB) to a "Sole Owner" doing business under the fictitious name "Clark Heating and Air Conditioning." However, Ball performed work on two contracts which he entered into under the transposed name "Clark Air Conditioning & Heating." He sought compensation on the two contracts for the work he performed and filed a foreclosure of mechanic's lien action, among other things, against the owner of the projects. The owner sought to have the case tossed out in a demurrer proceeding, arguing there was no license issued to "Clark Air Conditioning & Heating", the name on the contract where the words had been transposed. The trial court agreed and sustained the demurrer without leave to amend, effectively ending the case.
The Court of Appeal reversed the trial court's decision. In its reasoning, the Court indicated that the CSLB issues licenses to "individual owners, co-partnerships, and corporations" (§ 7065). Ball received a license under the license type "Sole Owner," i.e., an individual owner. A sole owner is a sole proprietorship and a sole proprietorship is not a legal entity separate from its individual owner.
"As a sole proprietorship, Clark Heating and Air Conditioning does not, and cannot, hold a contractor's license independent from Ball. Not only is Clark Heating and Air Conditioning not a distinct legal entity, it is not among the categories of "persons" defined by the CSLB to whom a contractor's license may be issued. (§§ 7065, 7068, subd. (b), 7096.) Thus, although the name "Clark Heating and Air Conditioning" appears on the license, it is David Edward Ball, an individual, who is the licensee as the owner of Clark Heating and Air Conditioning. That license entitles him, as the owner of Clark Heating and Air Conditioning, to perform contracting work under the name Clark Heating and Air Conditioning. (See § 7117.)"
Based on the foregoing, the Court found that because in the complaint, it was alleged that Ball entered into the contracts at issue as "David E. Ball, dba Clark Air Conditioning & Heating" and the lien was verified in the same manner, that was sufficient since the licensee and the contracting party is David E. Ball, and not the fictitious business name. "Use of a fictitious business name does not create a separate legal entity" distinct from the person operating the business. . . . Thus, like Clark Heating and Air Conditioning, Clark Air Conditioning & Heating is legally indistinguishable from Ball."
Although David Ball may have been rescued, since he acted as a "dba", use of an alternate or transposed name might not work for a partnership or corporation, where the exact name of the entity is the only legal name of the entity.
 Hydrotech Systems, Ltd. v. Oasis Waterpark (1991) 52 Cal.3d 988, 997
Wahid Guirguis is a shareholder with Hunt Ortmann, a leader in California construction law. If you have any questions about this bulletin, please contact him at (626) 440-5200, or via e-mail at Guirguis@huntortmann.com.
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