Legal Question in Construction Law in California

First, it is possible you have a legal malpractice action, but good luck finding a lawyer who will take a legal malpractice case that is worth only $20,000. Plus, the statute of limitations may have already run. Second, the defense is essentially saying that you were unlicensed when you did the job. This is the death sentence for contractors. The entity performing the work must be licensed AT ALL TIMES during the work. If not, you are not entitled to a dime. There is a narrow exception called substantial performance but it is, indeed, narrow. I'd have your lawyer look at this. Third, the CSLB had to have issued the license to some kind of entity. They would not have issued it to an LLC. Who did they issue it to? To you as an individual? If so, you MIGHT be able to sue under a theory of quantum meruit. Under this theory you would demonstrate that you did, in fact, have a license and that the work was performed by you under that license. Although you didn't have a contract, you are entitled to be paid for the quantum of work that you performed. This would have to be researched and it isn't something that can be answered in a couple of paragraphs. Unfortunately, the amount of money you are owed is what I call "No man's land." Trial is so expensive that it often makes no sense to go to trial for amounts between $7500 and $30,000, unless there is an attorney's fee clause in the contract. Since you would not be suing on a contract basis, there would be no attorney's fee clause. You are in a pretty tough situation, sorry.

This is an example of why you need a tax advisor or accountant for some questions and a lawyer for others. Most business attorneys are well aware that an LLC cannot be used to carry on a contractor business, and this should have become apparent to you when you tried to transfer your personal license to the LLC or to obtain a bond.

Now, as to the lawsuit. My guess is that you are still not using a lawyer. If so, you are in over your head. Even an experienced business lawyer would have to use all his or her skills and resources to (1) draft a lawsuit that would take the best route in initially pleading around the glaring problem of the LLC, and (2) deal with a demurrer, motion to dismiss, motion for summary judgment or judgment on the pleadings, etc., that the defense was very likely to throw at you.

Based on an overall trend of decisions in California that seems to favor a fair outcome in unlicensed or defectively-licensed contractor cases where the contractor has been dumb but not crooked, I have a general impression that there was, and probably still is, a way for you to get a favorable judgment. I am not prepared to say exactly how this could be done. That would require a careful overall review of the pleadings and the pending motion. However, I do have a gut feeling that you could prevail with the proper legal help.

Mr. Redenbacher touches on the key point here: you knew your LLC didn't have a license, because if you had tried to license the LLC the CSLB would have let you know you can't. So what in the world were you doing contracting in the name of your LLC when you knew you held an individual license? My guess is that you have been operating your LLC, and now your corporation no differently than if you were a sole proprietor. I have made a lot of money over the years suing people who make that mistake and think they are protected from personal liability by their business form. It is called piercing the corporate veil, and it is really easy to do to people who do not conduct their business as a real legal and business entity totally separate and independent from themselves individually. Unfortunately Mr. Whipple is wrong. The trend in California is toward extremely strict enforcement of the licensing requirements. Every time the courts carve out a "substantial compliance" exception, the legislature shuts it down with ever stronger statutes that say if you aren't properly licensed you get nothing. The current statute even requires unlicensed contractors to refund anything they have already been paid. You are going to need to consider this a $20,000 training course in business law and management. If you don't know how to run your business, hire someone who does, or retain an experienced construction attorney to help you out.

P.S. Have you even converted your contractors license from an individual one to a corporate one? It doesn't sound like you have. If not, your corporation is now in the same place as your LLC, contracting without a license. Any work you have done under the corporation, unless and until you convert from individual to corporate license, is illegal and the clients can refuse to pay you and sue you to collect back anything they have already paid you.