Manela v. Stone
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The Stone parties appealed from the trial court's order removing their mechanic's lien on a property owned by Plaintiff Manela and his former wife. The Stone parties jointly filed the mechanic's lien to collect payment for work they performed on the Manela property pursuant to a construction contract executed by the Manelas and Stone (the Manela contract), the quality of which Manela challenged in a separate lawsuit. The trial court concluded that Business and Professions Code section 7031, subdivision (a) likely required the Stone parties to forfeit compensation for any work performed under the Manela contract.
The Court of Appeal reversed, concluding that the order removing the mechanic's lien is appealable, and that the evidence does not support the trial court's conclusion that the Stone parties failed to show section 7031 probably does not require forfeiture. In this case, for the purposes of applying section 7031, the assignment agreement cannot establish that JDSS began performing under the contract before it was licensed. Furthermore, a reasonable trier of fact could not infer that any work had been performed at the request of or on behalf of JDSS before June 22, 2015. Nor does JDSS's mere issuance of a change order meet the definition of performance of the contract set forth in M.W. Erectors, Inc. v. Niederhauser Ornamental & Metal Works Co., Inc. (2005) 36 Cal.4th 412. Therefore, the record compels the conclusion that Stone was not performing under the contract on behalf of JDSS prior to JDSS becoming duly licensed, that JDSS therefore was not performing under the contract before it was licensed, and that section 7031 therefore does not apply. Finally, the court's conclusion is consistent with the policy rationale set forth in E. J. Franks Construction, Inc. v. Sahota (2014) 226 Cal.App.4th 1123, 1129-1130, which the court found persuasive.
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