Johnson v. Silver

Citation: 161 Cal. App. Supp. 2d 853

Court: California Court of Appeal; June 17, 1958; California; State Appellate Court

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In the case of Robert A. Johnson v. Murray Silver, the California Court of Appeals addressed two main issues regarding mechanics' lien actions involving the defendant Silver and the plaintiffs Johnson and Hough. Silver, the property owner, hired an unlicensed contractor, Shirey, to excavate for an apartment building. Shirey then hired the plaintiffs to haul away the excavated dirt. The court had to determine if the plaintiffs were contractors or employees of Shirey and whether their lack of a contractor's license barred their recovery.

The court found that the plaintiffs were employees, as they were compensated by wages and did not hold contractor licenses. They had an oral agreement with Shirey to provide labor and trucks for hauling, with no terms preventing Shirey from terminating the agreement or controlling the work process. The court's conclusion was supported by evidence showing that Johnson was paid hourly and managed payroll responsibilities for his hired drivers. The court referenced previous cases, affirming that individuals can be classified as employees even when they provide their own equipment.

The appellant's argument that Johnson's handling of social security and tax deductions classified him as a contractor was dismissed, as the determination of independent contractor versus employee status is primarily a factual issue based on the relationships involved. Ultimately, the judgments for the plaintiffs were upheld, aligning with the interpretation that they were employees as per Business and Professions Code sections 7026 and 7053.

In cases where a mixed employment relationship is evident, a trial court's finding supported by substantial evidence is upheld. Plaintiffs, having presented evidence of acting as employees or agents, shift the burden to the defendant to prove they were independent contractors. The lack of a contractor's license does not bar plaintiffs from recovery. Relevant case law indicates that licensing laws are designed to protect the public and prevent fraud, allowing subcontractors to pursue claims despite licensing issues. Courts have affirmed that unlicensed contractors cannot bring actions but can assert defenses related to debts owed. Furthermore, employees of an unlicensed contractor can still enforce mechanic's lien rights under the Code of Civil Procedure. The court modified judgments to remove references to a co-defendant and affirmed the modified judgments, allowing plaintiffs to claim a mechanic's lien. A dissenting opinion, however, argued that the claims for mechanic's liens are invalid due to the nature of void contracts.

California Constitution, article XX, section 15, establishes a lien for mechanics, materialmen, artisans, and laborers on property for the value of labor and materials provided. This lien is self-executing, as confirmed in Miltimore v. Nofziger Bros. Lumber Co. However, the lien for teamsters and draymen is governed by the Code of Civil Procedure, section 1181. In the case at hand, it is necessary to determine if an implied contract exists that would create a valid lien against Silver's property, despite the absence of a formal contract with the plaintiffs.

The findings indicating that Robert A. Johnson and Dana E. Hough were employees of Murray Silver lack evidential support. Plaintiffs performed work under the direction of Shirey, not Silver, who did not directly secure their services. Since Shirey was unlicensed, his contract with Silver is unenforceable, and thus, neither he nor his subcontractors can claim a mechanic's lien. Silver's payment to Shirey for the work done precludes him from recovering those payments, as established in Comet Theatre Enterprises v. Cartwright.

Under Code of Civil Procedure, section 1181, a mechanic's lien applies regardless of whether the work was done at the owner's request or through an agent, as stated in section 1182, which designates contractors as agents of the owner. The trial court likely recognized Shirey as Silver's agent based on these provisions, but the void status of the contract negates any agency relationship in securing the plaintiffs' services.

Although in Arizona, a materialman could recover despite a contractor's unlicensed status due to lack of constructive notice, in California, plaintiffs were aware of Shirey’s unlicensed status and thus cannot claim recovery. California law does not permit recovery based on quantum meruit for benefits conferred under a void contract, as supported by various precedents.

In the case of Colby v. Title Ins. Trust Co. and related precedents, the court establishes that plaintiffs cannot succeed in their claims against the defendant if their case hinges on an illegal transaction. Here, the plaintiffs must rely on such a transaction to pursue their claims against Silver or his property, thereby negating their causes of action. The statutory licensing provisions serve to protect both workers and property owners from contractor fraud, and both parties are entitled to this protection. Allowing recovery based on an illegal contract undermines the purpose of the Business and Professions Code, particularly as employees of the contractor cannot claim payment for work tied to a contract they had constructive notice of being illegal. The court asserts that contracts deemed void cannot be used to assert any claims, referencing Civil Code sections and prior case law which confirm that contracts not compliant with recording requirements are void for all purposes. Additionally, while there may be liability for bona fide holders of notes against unlicensed contractors, this does not extend to subcontractors who are aware of the contractor's incapacity. As a result, the judgment favoring Hough and Johnson regarding mechanic's liens and foreclosure is to be reversed.