Vigil v. Wesco Ins. Co. CA4/1

• Court: California Court of Appeal
• Decided: August 21, 2015
• Docket: D066712
• Status: Unpublished

Opinion

Filed 8/21/15 Vigil v. Wesco Ins. Co. CA4/1 NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

JUAN C. VIGIL et al., D066712

Cross-Complainants and Appellants,

v. (Super. Ct. No. 37-2012-00058529-CU-BC-NC) WESCO INSURANCE COMPANY,

Cross-Defendant and Respondent.

APPEAL from a judgment of the Superior Court of San Diego County, Jacqueline

M. Stern, Judge. Affirmed.

The Nguyen Law Group and Thanh Kim Nguyen for Cross-complainants and

Appellants.

Hausman & Sosa, Carlos E. Sosa, Larry D. Stratton, and Anthony A. Zepeda for

Cross-defendant and Respondent. I.

INTRODUCTION

Cross-complainants Juan C. Vigil and Belinda L. Vigil appeal from a judgment in

favor of cross-defendant Wesco Insurance Company (Wesco), entered after the trial court

sustained Wesco's demurrer to the Vigils' cross-complaint without leave to amend.

Wesco, a construction license surety, issued a bond to a construction company with

which the Vigils were engaged in a dispute. The trial court concluded that the allegations

in the Vigils' cross-complaint failed to state a cause of action against Wesco, because the

alleged default of Wesco's principal occurred prior to Wesco's issuance of the bond. On

appeal, the Vigils contend that the trial court abused its discretion in failing to grant them

leave to amend with respect to Wesco. The Vigils assert that they could amend their

cross-complaint in two different ways in order to state a viable claim against Wesco. We

affirm the trial court's judgment.

II.

FACTUAL AND PROCEDURAL BACKGROUND

According to the Vigils' cross-complaint, they entered into a contract with Houle

Construction, Inc. (Houle) in December 2011 for construction services at the Vigils'

2 home.1 The contract for services obligated the Vigils to pay $83,377.70. Houle began

work on the project in December 2011.

The cross-complaint suggests that between December 2011 and March 31, 2012,

Houle worked on the Vigil property. On March 31, Houle's contractor's license was

suspended for failing to secure and register a contractor's bond. According to the cross-

complaint, despite the fact that Houle's contractor's license was suspended, Houle

continued to work on the Vigil property "through the time final payment was due on July

5, 2012."

According to the complaint, on August 17, 2012, Houle filed a mechanic's lien

against the Vigil property to recover unpaid fees and costs. At that time, Houle was still

unlicensed. Houle secured a contractor's license bond from Wesco on August 29, 2012.

Upon the issuance of Wesco's bond, Houle's contractor's license became active again.

This bond was in effect between August 29, 2012, and September 29, 2013.

In late December 2012, the Vigils filed a cross-complaint against Houle and a

number of other individuals and entities, including multiple "Roe" cross-defendants. The

cross-complaint alleged four causes of action, including a claim on the "Contractor's

License Bond." Underlying this cause of action was the Vigils' contention that Houle had

performed unlicensed work and had completed that work in an "unworkmanlike manner."

1 Because we are reviewing the trial court's ruling on a demurrer to a cross- complaint, our recitation of the factual background of this matter is derived from the allegations set forth in that pleading. 3 The parties agree that at some point the Vigils named Wesco as one of the original

"Roe" cross-defendants.2

Wesco demurred to the cross-complaint on the ground that all of Houle's alleged

acts occurred outside of the period during which Wesco's bond was in effect. The trial

court sustained Wesco's demurrer, without leave to amend, and entered judgment in favor

of Wesco. The Vigils filed a timely notice of appeal.3

III.

DISCUSSION

A. Legal standards on review of the sustaining of a demurrer

This court applies the following well-established law in reviewing a trial court's

order sustaining a demurrer without leave to amend: " 'We treat the demurrer as admitting

all material facts properly pleaded, but not contentions, deductions or conclusions of fact

or law. [Citation.] We also consider matters which may be judicially noticed.'

[Citation.] Further, we give the complaint a reasonable interpretation, reading it as a

whole and its parts in their context. [Citation.] When a demurrer is sustained, we

determine whether the complaint states facts sufficient to constitute a cause of action.

[Citation.] And when it is sustained without leave to amend, we decide whether there is a

reasonable possibility that the defect can be cured by amendment: if it can be, the trial

2 The record does not include reflect when the Vigils identified and named Wesco as a cross-defendant.

3 The Vigils did not submit a reply brief. 4 court has abused its discretion and we reverse; if not, there has been no abuse of

discretion and we affirm. [Citations.] The burden of proving such reasonable possibility

is squarely on the plaintiff." (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)

B. Analysis

The Vigils appear to acknowledge that the cross-complaint, as drafted, fails to

state a cause of action against Wesco. They contend, however, that the trial court did not

give them a " 'fair opportunity' " to cure the defects of the complaint.

The Vigils attempt to demonstrate that they could amend their complaint to state a

viable cause of action against Wesco by asserting a cause of action for Houle's default

based on Houle's failure to repair the alleged defects during the period the bond was in

effect.

Although the Vigils did not include a copy of the bond in the record on appeal, it

appears to be undisputed that the bond in question was issued pursuant to section 7071.5

of the Business and Professions Code4. That section provides, in relevant part, that "[t]he

contractor's bond shall be for the benefit of the following: [¶] (a) A homeowner

contracting for home improvement upon the homeowner's personal family residence

damaged as a result of a violation of this chapter by the licensee." (Ibid.)

A surety's liability under a contractor's license bond is established by statute, and

no burden may be imposed on the surety other than those specifically set forth by statute.

4 Further statutory references are to the Business & Professions Code unless otherwise indicated. 5 (Brown v. Surety Co. of Pacific (1981) 122 Cal.App.3d 614, 620.) Further, the violation

giving rise to a contractor's liability must constitute a basis for discipline under the

Contractors State License Law. (Nelson Supply Co. v. Surety Co. of Pacific (1984) 161

Cal.App.3d 490, 492 [surety's obligations arise only if contractor violated the Contractors

License Law provisions].)

A surety's liability is commensurate with that of its principal, pursuant to the Civil

Code. (Civ. Code, § 2808 ["Where one assumes liability as surety upon a conditional

obligation, his liability is commensurate with that of the principal"].) The bond is to

serve as "security for the covenants of the underlying contract." (T&R Painting

Construction, Inc. v. St. Paul Fire & Marine Ins. Co. (1994) 23 Cal.App.4th 738, 744.)

A surety has no liability for the acts or omissions of the licensee that occur prior to the

posting of a bond. (Morton Regent Enterprises, Inc. v. Leadtec California, Inc. (1977) 74

Cal.App.3d 842, 846.)

The Vigils assert on appeal that Houle may have committed acts or omissions

during the period in which the bond was in effect, for which Houle, and thus Wesco,

could be liable. Specifically, the Vigils contend that if permitted to amend, they could

allege that Houle violated section 7113 when it " 'failed to take appropriate corrective

action' " to repair defects on the Vigils' property upon being requested to do so sometime

after March 2013.

Section 7113 provides: "Failure in a material respect on the part of a licensee to

complete any construction project or operation for the price stated in the contract for such

6 construction project or operation or in any modification of such contract constitutes a

cause for disciplinary action." Although section 7113 does not specifically identify the

failure to repair as ground for disciplinary action, the court in Michelson Concrete Co. v.

Contractors' State License Bd. (1979) 95 Cal.App.3d 631 concluded that evidence that

the contractor agreed to construct a slab for a specified price, provided work that was

unacceptable and did not meet trade standards, and "failed to take appropriate corrective

action after being repeatedly requested to do so," (ibid.) constituted substantial evidence

to support the trial court's finding that the contractor had violated section 7113.

Because a violation of section 7113 may provide a basis for liability for a surety

pursuant to section 7071.5, subdivision (a), the Vigils contend that Wesco may be held

liable under the bond if the Vigils are permitted to amend to allege that Houle

"default[ed] in [its] obligations to Appellants to make repairs . . . during the Respondent's

bonding period."

We conclude that even if the Vigils were to amend their cross-complaint in this

manner, it would not sufficiently cure the defects of their pleading. A licensing bond is,

by the terms of the relevant statute, intended to be "for the benefit of," inter alia, "[a]

homeowner contracting for home improvement upon the homeowner's personal family

residence" who has been "damaged as a result of a violation of this chapter by the

licensee." (Italics added.) This is the provision pursuant to which the Vigils claim

Wesco is liable to them for the alleged violations of its principal, Houle. According to

the language of the statute, however, in order for a surety to be liable for a license law

7 violation of its principal, a homeowner must have suffered damage as a result of the

particular violation alleged to have been committed by the principal. (§ 7071.5, subd. (a);

see also All Bay Mill & Lumber Co. v. Surety Co. (1989) 208 Cal.App.3d 11, 17 ["A

contractor's bond is for the benefit of persons damaged as a result of a contractor's

violation of the Contractors State License Law" and "not every technical violation of the

Contractors State License Law will give rise to a right to collect under the bond"].)

The Vigils have not provided any indication as to how they could amend to allege

that they suffered any damage, separate and apart from the damage that they have

already alleged they suffered as a result of Houle's original poor workmanship and

defective construction, arising from Houle's separate act of failing to repair the original

defective construction when requested to do so at a later point in time. Wesco's bond did

not go into effect until August 29, 2012—almost two months after July 5, 2012, the date

on which the Vigils allege construction was completed and final payment was made. The

only damage that the Vigils have identified either in the record or in briefing on appeal is

damage arising from the original construction completed by Houle—i.e., construction

that the Vigils alleged Houle "failed to perform . . . in a good and workmanlike fashion."

Because the Vigils have failed to identify any separate and additional harm they suffered

as a result of Houle's failure to repair when requested, they have not met their burden to

demonstrate that there is a reasonable probability that they can allege a viable cause of

action against Wesco for any acts or omissions of its principal during the effective period

of Wesco's bond.

8 The Vigils' alternative argument is that Houle engaged in fraud that essentially

continued into the bonding period. Specifically, the Vigils assert on appeal that Houle

"represented to Appellants that the construction work being performed at the Appellants'

residence would be done under the supervision of a licensed contractor," in order to

induce them to "pay Houle for unlicensed construction work in violation of Business &

Professions Code section 7068.1 . . . ." They further assert that they "first discovered and

learned about Houle's fraudulent scheme at James Houle's deposition when Mr. Houle

informed Appellants that he had stated to Mr. Villa, the construction supervisor on the

Appellants' project and an unlicensed contractor/officer of Houle, that immediately

before Houle and Villa entered into the subject construction contract that he, James

Houle, would not be acting as the RMO or as a supervisor for any jobs on behalf of

Houle Construction any longer." According to the Vigils, "because of this active

concealment of the truth, Appellants justifiably relied upon these representations because

the Appellants had no means to discover the truth about Houle's scheme and conspiracy

until after the conspiracy was completed."

In attempting to demonstrate that this proposed fraud claim could form the basis of

liability as to Wesco, the Vigils assert that "the last overt act of the conspiracy to commit

this fraudulent scheme by Houle and Villa occurred when Villa continued to make claims

that Houle was properly licensed throughout the entire construction period as late as

December 2012, during the Respondent's bonding period." (Italics added.)

9 The Vigils cannot demonstrate a reasonable probability of curing the defects of

their pleading with respect to Wesco through this proposed cause of action. The fraud

theory that the Vigils maintain would cure the defects in their cross-complaint as to

Wesco demonstrates that the alleged fraud, i.e., misconduct on Houle's part that might

have triggered a bonding company's liability, involved Houle's alleged misrepresentation

"that the construction work being performed at the Appellants' residence would be done

under the supervision of a licensed contractor." The Vigils claim that this

misrepresentation induced them to "pay Houle for unlicensed construction work," to their

detriment. As the cross-complaint alleges, however, the construction work was

completed by, and final payment provided as of, July 5, 2012. Thus, any

misrepresentations that Houle may have made, and any resulting damage to the Vigils

that may have occurred based on the Vigils' reliance on such alleged misrepresentations,

necessarily must have occurred prior to July 5, 2012.

Again, Wesco's bond was not in effect until August 29, 2012. The Vigils have

offered no allegation of any additional harm that they suffered as a result of a Houle

representative's allegedly fraudulent December 2012 assertions that Houle's work was

performed by a licensed contractor throughout the entire construction period. Thus, even

if we were to assume that the allegations the Vigils assert on appeal are true, the

statements made by a Houle employee in December 2012 cannot support an actionable

claim for fraud against Houle because the Vigils have not identified how they were

damaged by Houle's alleged misrepresentations in December 2012 regarding the loss of

10 its contractor's license. In the absence of a demonstration as to how the Vigils could

sufficiently allege all of the elements of a cause of action for fraud as to Houle that

includes acts or omissions that occurred during the bonding period, the Vigils have not

met their burden to demonstrate how they could cure the defects of their cross-complaint

as to Wesco.

The Vigils have failed to convince us that there is any reasonable probability that

they could cure the defects of their cross-complaint with respect to their claim against

Wesco. Wesco's contractor's license bond was issued after the completion of the

construction project at issue. Although the Vigils have been creative in their attempt to

ensnare Wesco in this litigation, they have not demonstrated how they could amend their

pleading to state a viable claim against Wesco. We therefore conclude that the trial court

did not abuse its discretion in sustaining Wesco's demurrer without leave to amend.

IV.

DISPOSITION

The judgment is affirmed.

AARON, J.

WE CONCUR:

HUFFMAN, Acting P. J.

O'ROURKE, J.