California construction and contractor law is pretty clear – you have to have a contractor’s license to get paid. If you don’t have a license and the owner does not pay, the courts will not help. The intent of the Contractor’s State License Law is to prohibit unlicensed contractors from being paid, thus discouraging those who have failed to comply with the law from providing unlicensed services for pay, protecting the public from incompetence and dishonesty. In the case of an entity, such as a corporation, it is the entity itself which is licensed. In a recent decision in San Francisco, the court went out of its way rescued one contractor that couldn’t decide if it was a limited partnership or a general partnership. Obviously this contractor had not consulted an experienced Sacramento and Bay Area business attorney.
In Montgomery Sansome LP v Rezai, the building owner Rezai hired “Montgomery Sansome Ltd. Lp.” (That’s what the contract said.) After doing some work on their apartment building, Rezai fired the contractor. The contractor, calling itself “Montgomery Sansome Lp” (no “Ltd”) sued for $203,000. The owner said they were neither a party to the contract, nor a licensed contractor. Here is the crazy history of this contractor, in chronological order:
1. Montgomery Sansome LP filed a certificate of limited partnership.
2. Montgomery Sansome LTD, a partnership, obtained a contractor’s license, with the same address as stated in the certificate of limited partnership.
3. Montgomery Sansome LTD renewed the license, with a Milbrae address.
4. The individuals filed a fictitious business name statement for Montgomery Sansome LTD Lp, a general partnership.
5. Montgomery Sansome LTD Lp entered the contract. The pre-printed work orders stated Montgomery Sansome LTD, Lp, with the Milbrae address.
6. Montgomery Sansome LTD Lp recorded a mechanics lien.
7. Montgomery Sansome LP filed this suit.
The Owner argued that “Montgomery Sansome LTD Lp” is a separate entity from “Montgomery Sansome LTD”, which had the license. The contractor said there was only one Montgomery Sansome business entity, and the different names were trivial. The court agreed that it was trivial. It noted that filing an FBN statement raises a rebuttable presumption of the truth of the information in it. However, evidence in the record supports the argument that Montgomery Sansome LTD LP in the statement was not a reference to a separate entity, but instead to the licensed entity. Other evidence supporting the finding of just one entity include:
the various documents refer to the same Milbrae address; records of the CSLB and Secretary of State use “slightly” different names to refer to what appears to be a single limited partnership; CSLB records use the same license number & Milbrae address for both Montgomery Sansome LTD and Montgomery Sansome LP. It found that the contractor was licensed, and the suit could proceed.
This much slop in their paperwork may be a clue as to why they were fired. Filing the fictitious business name statement as a general partnership tells potential customers that each individual would be personally liable for problems they create. A customer could rely on that in hiring them, only to discover they were in fact, with the court’s assistance, hiding behind the limited liability of a limited partnership.