Opinion
A156900
12-20-2019
WENJIA ZHANG, Plaintiff and Respondent, v. VICTOR ZHAO, et al., Defendants and Appellants.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Alameda County Super. Ct. No. RG16799226)
Appellants challenge a $55,000 judgment entered against them after a trial to the court. They contend the court erred in allowing respondent to amend his complaint at trial (apparently, before closing argument) to seek disgorgement of profits from an unlicensed contractor under Business and Professions Code section 7031, subdivision (a). Appellants further contend that substantial evidence does not support the judgment for $55,000. We will affirm.
I. FACTS AND PROCEDURAL HISTORY
In January 2016, respondent Wenjia Zhang filed a complaint against Victor Zhao, a "licensed contractor with Contractor's License #981229 doing business as Victor's Contractor," for breach of contract. According to the complaint, Zhang and Zhao entered into a contract for remodeling certain property; Zhang paid approximately $55,000 for the work; the work was not performed by the contractual deadline; Zhao breached the contract by providing "shoddy workmanship, defective work, non-performance of specific items, [and] unreasonable and unexcused delay in performance;" and Zhang suffered lost rents and incurred expense in having another contractor correct and finish the work. Attached to the complaint was an order form that bore a license number purportedly for Victor's Contractor and was signed by Zhang and Zhao.
Zhao filed a cross-complaint against Zhang for amounts allegedly owed for additional work Zhao performed pursuant to an oral agreement. The cross-complaint is not in the record.
In his May 2016 case management statement, Zhang asserted that Zhao "turns out to be an unlicensed contractor who is using what is believed to be his wife's license to do the [work]."
In November 2017, Zhang filed a motion to amend his complaint to include two new parties: Zhao's wife, Mei Yu Chen dba Victor's Contractor (Chen); and Chen's bonding company, American Safety Casualty Insurance Company (American). In support of his motion, Zhang explained: "A check with the California Contractor's License Board for the License Number 981229 shows that its holder is Mei Yu Chen, not Defendant Victor Zhao." Zhang further asserted that Chen was insured or bonded with American during the relevant period, and any claim Zhang might have against American had to be filed before the end of the year due to the limitations period.
The court granted the motion to amend on December 7, 2017. The next day, Zhang filed his amended complaint, adding Chen and American as parties but still alleging only a breach of contract claim.
In November 2018, Zhang filed a mandatory settlement conference statement and trial brief, again asserting only a breach of contract claim.
A bench trial was held on November 26-28, 2018. The appellate record does not contain a reporter's transcript or settled statement regarding the oral proceedings.
In a post-trial brief, Zhang argued that he was entitled to prevail under Business and Professions Code section 7031 (section 7031), which authorizes a person who used the services of an unlicensed contractor to recover all compensation paid to that contractor. Zhang contended the evidence at trial proved that Zhao, who signed the contract and did the work, was not licensed.
The trial court issued a proposed statement of decision on December 12, 2018, concluding among other things that Zhang was entitled to recover $55,000 under section 7031. On December 20, 2018, appellants objected to the statement of decision on the grounds that Zhang alleged only a cause of action for breach of contract and never raised the issue of disgorgement under section 7031; Zhang personally made payments totaling only $25,000; and the judgment was inconsistent with the evidence because Zhang made payment only to "Victor's Contractor."
On December 24, 2018, Zhang responded to appellants' objection, stating that "at the conclusion of the trial, [Zhang] moved the court to amend his Complaint" and that "[Zhang], through counsel, spent a substantial part of the oral closing argument on November 28, 2018 to argue why profits should be disgorged and returned to [Zhang]" under section 7031.
On February 27, 2019, the trial court issued its final Statement of Decision, finding as follows. Zhang entered into a contract to have Zhao renovate his property in Alameda, agreeing on a price of $55,646.10. The Work Order Form for the renovation was signed by Zhang and Zhao. Zhao is an unlicensed contractor; Victor's Contractor, for which Zhao claimed he was an employee, held a license procured by Chen. Check payments issued by Zhang or others on his behalf to Victor's Contractor totaled $55,000. Zhao performed construction work at the property until January or February 2016, but Zhang contended the work was not done in a professional manner - citing failed inspection reports - and Zhang had to hire another contractor. Zhao contended that he and his wife did the work, and that he also did work under an oral agreement for which he was not paid over $21,000 (the basis of his cross-complaint).
The court ruled that Zhang had not proven his breach of contract claim, because he failed to produce expert testimony to support his allegations of breach and damage. However, the court also noted Zhang's argument that Zhao was an unlicensed contractor whose profits should be disgorged pursuant to section 7031, as well as defendants' argument that Zhao was an employee of Victor's Contractors, which was owned by Chen, who was licensed. Finding Zhao's testimony not credible, and observing the lack of relevant evidence that Zhao was licensed, the court determined that Zhang was entitled to disgorgement of the profits earned on the project. As to Zhao's cross-complaint, the court ordered judgment for Zhang because section 7031 prohibits an unlicensed contractor from maintaining an action to collect compensation. In conclusion, the court ruled: "As to Plaintiff's complaint, judgment is for the Plaintiff in the amount of $55,000.00. As to Defendant's Cross-Complaint, judgment is for the Plaintiff."
The court entered judgment pursuant to its Statement of Decision in March 2019: "As to Plaintiff's Complaint, judgment is for Plaintiff Wen Jia Zhang in the amount of $55,000 against Defendants Victor Zhao, dba Victor's Contractors, Mei Yu Chen, dba Victor's Contractors, and American Safety Casualty Insurance Company. . . . As to Defendant's Cross-Complaint, judgment is for Plaintiff and Cross-Defendant Wen Jia Zhang." This appeal followed.
II. DISCUSSION
In their opening brief, appellants contend the trial court erred by "(1) granting Respondent Zhang to [sic] at close of trial to amend and add new cause of action under [section 7031]; (2) issuing a Statement of Decision and Judgment that significantly prejudiced Appellants by denying them the ability to refute the new issue and assert new affirmative defenses that was [sic] belatedly raised and argued at close of trial; and (3) issuing a Statement of Decision and Judgment that was not support[ed] by substantial evidence admitted during trial." We consider the first two contentions in deciding whether allowing the amendment was an abuse of discretion; we then consider the issue of substantial evidence.
A. Amendment
The court may allow a party to amend any pleading "at any stage of the proceedings, up to and including trial," in the absence of prejudice to the other party. (Atkinson v. Elk Corp. (2003) 109 Cal.App.4th 739, 761; Code Civ. Proc., § 473, subd. (a).) "It is of course settled that the allowance of amendments to conform to the proof rests largely in the discretion of the trial court and its determination will not be disturbed on appeal unless it clearly appears that such discretion has been abused." (Trafton v. Youngblood (1968) 69 Cal.2d 17, 31; see Code. Civ. Proc., § 469 ["Variance between the allegation in a pleading and the proof shall not be deemed material, unless it has actually misled the adverse party to his or her prejudice in maintaining his or her action or defense upon the merits."].)
Here, the Statement of Decision does not mention any request by Zhang at trial to amend his pleading to add a section 7031 claim, but it is evident that such a request occurred, since Zhang's post-trial brief referred to section 7031 and the Statement of Decision and judgment imposed liability based on that section. Moreover, the final Statement of Decision and judgment were filed after appellants had objected to the award under section 7031 in the proposed Statement of Decision, so we must conclude that the court considered appellants' arguments. (Wilson v. Sunshine Meat & Liquor Co. (1983) 34 Cal.3d 554, 563 (Wilson) [trial court is presumed to have followed the law].) It is appellants' burden to demonstrate from the appellate record that the court abused its discretion in its ruling. (Elena S. v. Kroutik (2016) 247 Cal.App.4th 570, 574 (Elena S.).)
Appellants fail to establish an abuse of discretion. Because the appellate record does not contain a reporter's transcript, settled statement, or other record of the oral proceedings at which Zhang made his request and the court granted it, we must presume that the court's decision was supported by substantial evidence and correct. (Wilson, supra, 34 Cal.3d at p. 563 [judgment or order is presumed correct, and all presumptions are indulged to support it on matters as to which the record is silent]; Estate of Fain (1999) 75 Cal.App.4th 973, 992 [when no reporter's transcript is provided on appeal, appellant is precluded from raising an argument as to the sufficiency of the evidence].)
Moreover, what is in the appellate record (or reasonably inferable from it) does not suggest any error. Zhao knew or should have known he was not personally licensed when he performed the work. Although no section 7031 claim was alleged in Zhang's pleading, it was plain that Zhang was also aware of Zhao's lack of licensure, since Zhang asserted in his mandatory settlement conference statement that the license was actually held by Chen, and repeated that assertion in adding Chen to the complaint. It should not have been a shock to counsel for Zhao, a purportedly unlicensed contractor, to learn that his opponent would pursue liability on the ground Zhao was unlicensed. Moreover, the factual predicate for the section 7031 claim was simply that Zhao had no license - an issue that had been raised at trial, and on which Zhao had the opportunity to present evidence (and did present evidence). Because the legal theory of section 7031 liability was foreseeable, and no new factual issues were raised, it cannot be said that any delay in seeking the amendment misled appellants to their prejudice.
Appellants argue that they had "no chance to oppose" Zhang's request to add the section 7031 claim. The argument is meritless. According to the clerk's transcript, Zhang moved the court to amend his complaint at the conclusion of the trial and spent much of closing argument on the issue of disgorgement. There being no reporter's transcript to demonstrate otherwise, we presume that appellants had an opportunity to weigh in on Zhang's request as well. (Elena S., supra, 247 Cal.App.4th at p. 574 [without a transcript of the oral proceedings, party could not establish that he did not orally stipulate on the record to a hearing before a commissioner].)
Appellants further argue that Zhang's late addition of the section 7031 claim was prejudicial because, if the claim had been added before trial, appellants would have been able to refute the licensure claim by showing that Zhao, although unlicensed, had nonetheless substantially complied with the licensure statute. But this argument is unavailing as well. In the first place, there is no indication appellants ever argued to the trial court that it should deny the request to add the section 7031 claim on this ground. Moreover, appellants fail to demonstrate that they actually had any evidence of substantial compliance, sought a continuance to present such evidence, made an offer of proof of such evidence, or were denied a continuance or opportunity to reopen the case to introduce such evidence. There is, in short, no indication that Zhang could have demonstrated substantial compliance even if the section 7031 claim had been added earlier or the court had extended appellants' time to litigate it.
Zhao says substantial compliance may be established if the contractor had previously been licensed as a contractor in the state, acted reasonably and in good faith to maintain licensure, did not know or reasonably should not have known that he was not duly licensed, and acted promptly and in good faith to reinstate the license upon learning it was invalid. (Bus. & Prof. Code § 7031, subd. (e).) --------
The cases on which appellants rely are unavailing. In Barrows v. American Motors Corp. (1983) 144 Cal.App.3d 1, the court concluded that a plaintiff was not barred from amending a complaint to substitute individuals for Doe defendants notwithstanding a delay in doing so, because no prejudice was shown. (Id. at pp. 7-9.) To the extent Barrows is germane to this case, it tanks appellants' arguments. In Duchrow v. Forrest (2013) 215 Cal.App.4th 1359, the court ruled that the plaintiff should not have been allowed to amend the pleadings mid-trial to rely on a different paragraph in a contract, because the amendment introduced new and different issues into the case and resulted in significant prejudice due to a quadrupling of the damages and the defendant's lack of opportunity to investigate and respond to a new theory of liability. (Id. at pp. 1377-1383.) Appellants fail to demonstrate that anything like that occurred here.
Appellants have not established that the court abused its discretion in allowing Zhang to amend the pleadings to add the section 7031 claim.
B. Substantial Evidence to Support Award of $55,000 in Damages
Appellants argue that the judgment awarding Zhang $55,000 is not supported by substantial evidence, and exceeds the bounds of reason, because checks admitted into evidence show that Zhang only paid Victor's Contractor $25,000. The balance of the $55,000 was paid to Victor's Contractor by persons not party to the litigation.
Appellants fail to establish error. They urge that the "key question" is whether "the evidence of all the checks admitted during trial provides a sufficient basis for the court's findings." Not so. The question is whether the evidence admitted at the trial - including the oral testimony - provided substantial evidence supporting those findings. On that question, appellants cannot establish error in the absence of a reporter's transcript. (Estate of Fain, supra, 75 Cal.App.4th at p. 992.)
Appellants also complain that the judgment renders them jointly liable for the $55,000. They argue that the checks were made out to Victor's Contractor, so the court could order disgorgement only from Victor's Contractor. Furthermore, American never received those payments and was not itself subject to the licensure statute. It appears from the record, however, that "Victor's Contractor" was merely a fictitious business name by which Zhao purportedly did business, not a separate legal entity. Moreover, the record does not indicate that any of these arguments were raised in the trial court, and it is not for us to decide these issues in the first instance. Nor could we decide them, without any record of the oral proceedings at trial.
Appellants fail to establish error.
III. DISPOSITION
The judgment is affirmed.
/s/_________
NEEDHAM, J. We concur. /s/_________
SIMONS, ACTING P.J. /s/_________
BURNS, J.