Contractors Labor Pool, Inc. v. Westway Contractors, Inc.

and/or Westway in connection with the labor agreement; (5) Westway would provide CLP with all information needed to maintain CLP’s mechanic’s lien rights and would cooperate with CLP as reasonably requested in connection with filing such liens.

After the labor agreement was executed by CLP and Westway, Westway placed orders for workers, such as carpenters, laborers and superintendents, by calling CLP and making a verbal request. If a particular worker was not satisfactory to Westway, Westway had the right to send that worker back, and Westway directed, controlled and supervised the workers’ activities on the jobsite. CLP paid the workers’ wages and employment benefits, provided workers’ compensation insurance, and was responsible for the workers’ tax withholding. CLP invoiced Westway weekly, based on the actual hours worked by the Special Employees.

Westway eventually fell behind in paying CLP’s invoices, and by April of 1993, Westway owed CLP $170,495.47. When this amount remained unpaid, CLP ceased to provide workers to Westway and, in addition, filed the within action to recover the amounts owing. After a trial, the court found (1) Westway liable to CLP in the amount of $170,495.47, plus service charges, (2) Westway’s president liable to CLP in the amount of $50,000 plus interest, and (3) CLP entitled to recover $170,495.47, plus service charges against the payment bond furnished by ABC. A motion by ABC for a new trial was denied. This timely appeal followed.

Contentions

ABC contends that (1) CLP has no right to recover against the payment bond because it is not a claimant protected by section 3110; (2) alternatively, pursuant to Business and Professions Code section 7031, CLP has no right to any recovery under its contract with Westway, because if CLP is indeed a claimant protected by section 3110, then it necessarily was acting in the capacity of a contractor when its employees performed services on the work of improvement, and CLP had no contractor’s license when these services were performed. CLP disputes each of the above contentions and further argues that the court’s postjudgment order awarding attorney fees was so inadequate as to constitute an abuse of discretion.

Discussion

1. CLP, as a Furnisher of Labor, Was Entitled to Recover on the Payment Bond.

ABC contends CLP is not entitled to recover against the bond, because it is not entitled to a mechanic’s lien under section 3110. ABC cites

Primo Team, Inc. v. Blake Construction Co. (1992) 3 Cal.App.4th 801 [ 4 Cal.Rptr.2d 701 ] (hereafter, Primo Team) in support of its claim that CLP is not entitled to recover against the bond. Primo Team held that an employment services company which performed personnel and payroll services for a subcontractor on a public project, but was not actually the employer of the workers, was not entitled to recover against a performance bond. (Id. at p. 804.) ABC argues that “[F]or all meaningful purposes, the workers were really employed by Westway while they were on the jobsite because West-way in fact directed and controlled their activities.” Therefore, ABC argues that CLP was an employer of the workers in name only and, like the plaintiff in Primo Team, is consequently not entitled to recover on the performance bond.

We disagree. As a furnisher of labor contributing to the public work of improvement, CLP was a claimant protected by the mechanic’s lien law and was therefore entitled to recover against the payment bond. (Myers v. Alta Construction Co. (1951) 37 Cal.2d 739 , 742 [ 235 P.2d 1 ]; Sweet v. Fresno Hotel Co. (1917) 174 Cal. 789 , 797 [ 164 P 788 ]; Primo Team, supra, 3 Cal.App.4th at p. 807; Rich-Lee Equipment Rentals, Inc. v. Intermountain Constr. Co. (1978) 79 Cal.App.3d 581 , 588-589 [ 145 Cal.Rptr. 106 ]; Contractors Dump Truck Service, Inc. v. Gregg Constr. Co. (1965) 237 Cal.App.2d 1 , 4-5 [ 46 Cal.Rptr. 738 ].).

a. Those Who Furnish Laborers for a Public Work of Improvement, as Well as Those Who Perform Labor Themselves, Are Entitled to Recover Against a Payment Bond.

Section 3248 provides that a payment bond on a construction contract awarded by a public entity must “[bjy its terms inure to the benefit of any of the persons named in Section 3181 so as to give a right of action to such persons or their assigns in any suit brought upon the bond.” Section 3181 provides that: “Except for an original contractor, any person mentioned in Section 3110, 3111 or 3112, or in Section 4107.7 of the Public Contract Code, or furnishing provisions, provender, or other supplies” may serve a stop notice for a public work. Section 3110 mentions the following persons and entitles such persons to a mechanic’s lien for the value of labor done or materials furnished to any work of improvement: “[mechanics, material-men, contractors, subcontractors, lessors of equipment, artisans, architects, registered engineers, licensed land surveyors, machinists, builders, teamsters, and draymen, and all persons and laborers of every class performing labor upon or bestowing skill or other necessary services on, or furnishing materials or leasing equipment to be used or consumed in or furnishing

The Primo Team court rejected Prime’s argument, citing Sweet v. Fresno Hotel Co., supra, 174 Cal. 789 at pages 807-809. In Sweet, the Supreme Court found Sweet, a labor supplier, to be a proper mechanic’s lien claimant as to one of two contracts that he had with a general contractor, but not as to the other contract. The contract which gave rise to a valid lien claim was executed June 1, 1911, and provided for Sweet to furnish his own employees as workers on a work of improvement. (Sweet v. Fresno Hotel Co., supra, 174 Cal. at pp. 796-797.) By contrast, the other contract, executed April 1 of the same year, had only provided for Sweet to supervise work performed by the employees of the general contractor and to assume and pay the wages due from the contractor to the workers. (Id. at pp. 795-796.) Respecting the April 1 contract, the Sweet court reasoned that “[s]o far as the work is concerned, Sweet’s only function was to act as superintendent and to pay the wages due from the contractor to the men. He was not the employer. In effect he was loaning money to the contractor and performing service as superintendent of the work, for which service he was to receive an amount equal to ten per cent of the wages earned by the men. The law does not allow a lien for money loaned to a building contractor to enable him to carry out his contract.” (Id. at pp. 795-796.) The Primo Team court observed that Primo neither supervised the construction activities of the workers it assembled for R.J., as Sweet had done in his April 1, 1911, contract, nor employed the workers. The court therefore concluded that Primo had not “furnished” labor to the work of improvement and thus was not entitled to recover against the payment bond. (Primo Team, supra, 3 Cal.App.4th at p. 809.)

b. The Employer of Workers Who Contribute to a Work of Improvement Is a “Furnisher” of the Employees’ Labor.

ABC’s argument in this case is the logical inverse of Primo’s argument in Primo Team, supra, 3 Cal.App.4th 801 . Primo argued that it had performed functions identical to persons and entities found to be protected by the mechanic’s lien law as furnishers of labor, and lacked only the legal status of employer of the workers. Therefore, Primo contended it was entitled to lien rights and rights related to them, in particular, the right to recover against a payment bond. (Id. at pp. 806-808.) ABC, on the other hand, argues that CLP performed all of the same functions for Westway as were performed by Primo for R.J., and CLP differed from Primo only by assuming the label of employer. Therefore, ABC argues that CLP, like Primo, is not entitled to a mechanic’s lien or recovery against a payment bond.

This argument fails for reasons stated in the venerable Sweet case. The defendant in Sweet contended that the June 1 contract, like that of April 1,

did not give rise to lien rights, because it provided for Sweet to perform functions essentially identical to those he performed under the April 1 contract. (Sweet v. Fresno Hotel Co., supra, 174 Cal. at p. 796.) After concluding that Sweet’s April 1 contract did not entitle him to mechanic’s lien rights, the Supreme Court then stated that the terms of the June 1 contract compelled a different result. “We cannot agree to the proposition that this contract was a mere reiteration or renewal of the previous contract of April 1, 1911. Its language was different from the previous contract in a very important particular, and was presumably made so with the purpose of changing its effect. [U It may be true, as contended by the defendant, that the actual mode of carrying on the work and paying the men after June 1st did not differ materially in appearance from that practiced before June 1st. But this similarity was not fatal to the validity, or destructive of the effect, of the new contract. The old contract was, in effect, an agreement by Sweet to advance money to pay the debts owing by Farley & Co.; the new one was an agreement by him to bestow labor upon the building, hiring the men himself and paying their wages.” (Sweet v. Fresno Hotel Co., supra, 174 Cal. at pp. 796-797, italics added.)

The import of the foregoing is that the legal status of an employer of laborers furnished to a work of improvement is the crucial factor which distinguishes a person who “furnishes” such laborers to the project, and is thus entitled to lien rights, from a person who merely organizes the work force, performs administrative functions, advances wages, or does all three in behalf of another, and is consequently not entitled to lien rights. ABC argues, however, that Sweet’s responsibility of supervising the work under the June 1 contract was crucial in the Supreme Court’s determination that he was entitled to a mechanic’s lien in respect to that contract. In support of this argument, ABC cites the high court’s observation that Sweet “actually did select and hire the men and superintend them in the work under the contract of June 1st.” (174 Cal. at p. 797, italics added.) But Sweet also supervised the work under the April 1 contract, and that fact did not entitle him to a mechanic’s lien. To the contrary, the Supreme Court remarked that, under the April 1 contract, “. . . Sweet’s only function was to act as superintendent and to pay the wages due from the contractor to the men. He was not the employer.” (Id. at p. 795, italics added.)

The designation of a person as the “employer” of another is not a mere label, as ABC contends. Rather, such designation signifies a legal relationship in which the employer has legal responsibilities to the employee and to third parties, which are absent where a person merely supervises another’s employees or disburses to such employees wages which are due from the

other person to the employees, as was the case under the April 1, 1911, contract in Sweet. Essentially, Sweet, Myers v. Alta Construction Co., supra, 37 Cal.2d 739 , Primo Team, supra, 3 Cal.App.4th 801 , Rich-Lee Equipment Rentals, Inc. v. Intermountain Constr. Co., supra, 79 Cal.App.3d 581 , and Contractors Dump Truck Service, Inc. v. Gregg Constr. Co. supra, 237 Cal.App.2d 1 , all stand for the proposition that an entity which takes upon itself the legal responsibilities of an employer is entitled to a mechanic’s lien and related remedies if it furnishes the labor of its employees to a work of improvement, but one who does not assume those legal responsibilities is not.

c. Substantial Evidence Supports the Trial Court’s Conclusion That CLP Was the Employer of the Workers It Sent to Westways, and Was Consequently a “Furnisher” of Their Labor.

Finally, ABC argues that, under the labor agreement between CLP and Westway, CLP did not bear certain responsibilities that are generally borne by an employer. In particular, the contract provided that CLP would not be responsible for damages caused by the Special Employee’s performance or nonperformance of work, and that Westway agreed to indemnify CLP for “all claims for damages to persons or property arising out of work performed by the Special Employees. ...” Under the doctrine of respondeat superior, an employer is liable for torts of its employees. ABC thus argues that the contract provision relieving CLP of such liability is evidence that CLP was not the employer of the workers furnished to Westway.

The foregoing argument is logically flawed. In truth, if the agreement between CLP and Westway contemplated that Westway would be the workers’ employer, and CLP would merely function as Westway’s personnel administrator, there would be no need for a contractual provision for West-way to be responsible for the workers’ torts, for Westway would have that responsibility as a matter of course under the respondeat superior doctrine. The express provision assigning responsibility for the employees’ torts to Westway raises an inference that, absent the provision, the responsibility would belong to CLP, and this, in turn, raises the inference that CLP was indeed the workers’ employer. This latter inference is strengthened by the provision that Westway agreed to “indemnify” CLP for the workers’ torts. If Westway were the workers’ employer, it would have primary responsibility for torts committed in the course of their employment. Inasmuch as the contract provided for Westway to indemnify CLP for such torts, it follows that it was CLP which had primary responsibility for them—a responsibility which flowed from CLP’s status as the workers’ employer.

Ultimately, the nature of the relationships among CLP, Westway and the Special Employees is a question of fact, on which we defer to the trial court. (Rodoni v. Harbor Engineers (1961) 191 Cal.App.2d 560 , 561-563 [ 12 Cal.Rptr. 924 ] [substantial evidence supported trial court’s finding that one who leased equipment to a developer and furnished laborers, including himself, to operate such equipment was not a contractor, required to have a contractor’s license, but was an employee as to his own services and a furnisher of his employees’ labor, and was entitled to a mechanic’s lien].) Here, the trial court made the following findings, among others, on that question: (1) the workers were interviewed, screened and hired by CLP according to its own procedures and applying its own employment criteria; (2) the employees signed applications for employment with CLP and also signed written conditions of employment identifying them as employees of CLP; (3) CLP provided the employees with its own standard “Employee Handbook”; (4) while Westway had a right to reject or “send back” any worker sent to the jobsite by CLP, Westway had no right to go farther and terminate the worker’s employment with CLP; (5) the workers’ time cards and other personnel documents identified them as CLP employees; (6) CLP covered the employees with its own workers’ compensation insurance policy; and (7) when Westway fell into default in payments to CLP, CLP threatened to withdraw workers from the project, not to stop processing or paying payroll for Westway.

ABC has not disputed any of the above findings; substantial evidence supports the findings; and the findings support the conclusion that CLP was indeed the workers’ employer. The trial court therefore correctly determined that CLP was a “furnisher” of labor to the work of public improvement and was consequently entitled to recover against the payment bond.

2. CLP Did Not Act in the Capacity of a Contractor and Thus Was Not Required to Have a Contractor’s License.

ABC contends, in the alternative, that CLP is not entitled to any recovery on its contract with Westway, because it acted in the capacity of a contractor when its employees performed services on the project. ABC contends that, by CLP’s very act of characterizing itself as the employer of workers who performed services on the project, CLP has placed itself squarely within the definition of a “contractor” under the Contractors’ State License Law. Therefore, ABC contends, CLP was required to have a contractor’s license. CLP did not have a contractor’s license at the time its employees performed services. Therefore, ABC contends that, pursuant to

or supervising the work performed, although “employing” others, for purposes of the mechanic’s lien law does not. The purpose of the licensing law is to protect the public from incompetence and dishonesty in those who provide building and construction services. The licensing requirements provide minimal assurance that all persons offering such services have the requisite skill and character, understand applicable local laws and codes, and know the rudiments of administering a contracting business. (Hydrotech Systems, Ltd. v. Oasis Waterpark (1991) 52 Cal.3d 988 , 995 [ 277 Cal.Rptr. 517 , 803 P.2d 370 ]; Home Depot, U.S.A., Inc. v. Contractors’ State License Bd. (1996) 41 Cal.App.4th 1592 , 1598 [ 49 Cal.Rptr.2d 302 ].) To effect this purpose, the law need apply only to those who actually perform or supervise the performance of construction services; it need not apply to those who only supply materials to be used by others or laborers who will be supervised by others. Thus, a person or company in the business of supplying equipment or hiring out laborers to be supervised by others is not deemed to act in the capacity of a contractor and is not required to have a license. (Contractors Dump Truck Service, Inc. v. Gregg Constr. Co, supra, 237 Cal.App.2d at p. 7; Rodoni v. Harbor Engineers, supra, 191 Cal.App.2d at pp. 562-563.)

In support of its claim that CLP acted in the capacity of a contractor when it furnished laborers to Westway, ABC cites Vallejo Development Co. v. Beck Development Co. (1994) 24 Cal.App.4th 929 [ 29 Cal.Rptr.2d 669 ], Skipper v. Gilbert J. Martin Constr. Co. (1957) 156 Cal.App.2d 82 [ 318 P.2d 732 ], Albaugh v. Moss Construction Co. (1954) 125 Cal.App.2d 126 [ 269 P.2d 936 ], and Phillips v. McIntosh (1942) 51 Cal.App.2d 340 [ 124 P.2d 835 ]. These cases are inapposite, for in each the person or entity seeking compensation for unlicensed services contracted to perform or to supervise construction services—activities plainly within the scope and purposes of the Contractors’ State License Law. In Vallejo Development Co., supra, 24 Cal.App.4th 929 , the plaintiff contracted to be “ ‘solely responsible for completion of all offsite, onsite and infrastructure improvements’ ” for a residential development. (Id at p. 936.) The plaintiff in Skipper v. Gilbert J. Martin Constr. Co., supra, 156 Cal.App.2d 82 contracted to “furnish labor and himself as general foreman for the purpose of framing . . . houses at the basic price of 38 [cents] per square foot per house.’ ” (Id. at pp. 84.) The plaintiff in Albaugh v. Moss Construction Co., supra, 125 Cal.App.2d 126 contracted to furnish labor and materials and to complete the subject construction project at the rate of six houses per day. (Id. at p. 129.) In Phillips v. McIntosh, supra, 51 Cal.App.2d 340 , the plaintiff, through her manager, who was also her husband, contracted to perform plumbing services for the defendant. (Id. at pp. 343.)

In each of these cases, the plaintiff was unlicensed, was found to have acted in the capacity of a contractor, and was consequently denied recovery

In determining what constitutes a reasonable attorney fee when a contract or statute provides for such an award, courts should consider the nature of the litigation, its difficulty, the amount involved, and the skill required and success of the attorney’s efforts, his or her learning, age and experience in the particular type of work demanded, the intricacies and importance of the litigation, the labor and necessity for skilled legal training and ability in trying the cause, and the time consumed. (Church of Scientology v. Wollersheim (1996) 42 Cal.App.4th 628 , 659 [ 49 Cal.Rptr.2d 620 ]; Hadley v. Krepel (1985) 167 Cal.App.3d 677 , 682 [ 214 Cal.Rptr. 461 ].) The amount to be awarded to a party as attorney fees is a matter within the sound discretion of the trial judge. (Church of Scientology v. Wollersheim, supra, 42 Cal.App.4th at p. 659; Clayton Development Co. v. Falvey (1988) 206 Cal.App.3d 438 , 447 [ 253 Cal.Rptr. 609 ].) However, the court has the duty to exercise its discretion in making the determination, and a case will be remanded for a redetermination of the fee award if it is evident that the court’s ruling was not an exercise of discretion, but the consequence of an erroneous view of the court’s own power. (Sternwest Corp. v. Ash (1986) 183 Cal.App.3d 74 , 76 [ 227 Cal.Rptr. 804 ].)

Here, the trial court indicated by its remarks from the bench that it did not take due consideration of the factors listed in Church of Scientology v. Wollersheim, supra, 42 Cal.App.4th 628 , 659 and Hadley v. Krepel, supra, 167 Cal.App.3d 677 , 682 in making its attorney fee award. Instead, the record shows that the court followed the formula provided in Los Angeles County Superior Court rule 3.2 and, based on that formula, awarded CLP less than 15 percent of the amount it claimed.

The court did not, indeed, entirely fail to exercise discretion as to the amount of attorney fees. The trial judge’s remarks from the bench indicate he exercised some independent evaluation of CLP’s fees claim, for he stated he did not believe there had been a showing that the amounts over and above $7,965.49 were “reasonable.” However, the judge also stated that he believed the formulas in Los Angeles County Superior Court rule 3.2 imposed “presumptive limitations,” suggesting he declined to award CLP its meticulously documented attorney fees because he believed himself subject to such limitations. The limitations which the trial judge referred to evidently were those in subdivision (d) of rule 3.2, which authorize an award over the amounts provided by the formulas in subdivisions (a) through (c) only where “extraordinary” services were performed. It thus appears that the trial court believed it could not award fees greater than those provided by the formulas unless it determined that the services were “extraordinary.” This was error.

Los Angeles County Superior Court rule 3.2, which limits attorney fee awards to amounts calculated under the rule’s formulas, except when the