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MATTHEW A. HAULK (SBN: 272457) by Superior Court of California, County of San Mateo
RAGGHIANTI FREITAS LLP ON 8/17/2021
1101 Fifth Avenue, Suite 100
San Rafael, California 94901 By. Is Marcela Enriquez
Telephone: (415) 453-9433
Facsimile: (415) 453-8269
Attorneys for Defendants
PUNIT K. SARNA and
PUJA SARNA
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF SAN MATEO
10 LOUIS PAYCHECK, CASE NO.: 19CIV02595
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Plaintiff, DECLARATION OF MATTHEW A.
12 HAULK IN SUPPORT OF MOTION FOR
Vs. PREJUDGMENT INTEREST
13,
PUNIT K. SARNA, et al., DATE: October 12, 2021
14 TIME: 2:00 p.m.
Defendants. DEPT.: 4
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COURTROOM: N
16 JUDGE: Hon. Nancy L. Fineman
17 AND RELATED CROSS-ACTION. Complaint Filed: May 10, 2019
Trial: May 12, 2021
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20 |, Matthew A. Haulk, declare:
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21 | am a partner with Ragghianti Freitas, LLP, an attorney duly admitted to
22 practice before the Court and all of the Courts of the State of California, and counsel of
23 record for Punit Sarna and Puja Sarna. | have personal knowledge of the information set
24 forth herein below, unless noted as based on information and belief, all of which is true
25 and correct of my own personal knowledge, and if called upon to testify, | could and
26 would competently testify thereto.
27 2. On June 30, 2021, the Statement of Decision for this action was filed in San
28 Mateo Superior Court. A true and correct copy of the aforesaid Statement of Decision is
attached hereto as Exhibit 1.
DECLARATION OF MATTHEW A. HAULK IN SUPPORT OF MOTION FOR PREJUDGMENT INTEREST
3 The parties stipulated to the authenticity of the trial exhibits for the Phase 1
Trial of this action, including Trial Exhibit 4, a copy of the checks that Sarna wrote to
Paycheck for this project. A true and correct copy of Trial Exhibit 4 is attached hereto as
Exhibit 2.
4 A true and correct copy of Punit Sarna’s First Amended Cross-Complaint is
attached hereto as Exhibit 3.
| declare under penalty of perjury under the laws of the State of California that the
foregoing is true and correct. Executed this 17th day of August 2021, at San Rafael,
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California.
N—
Matthew A. Haulk
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DECLARATION OF MATTHEW
A. HAULK IN SUPPORT OF MOTION FOR PREJUDGMENT INTEREST
EXHIBIT 1
FILED
SAN MATEO COUNTY
JUN 8 0 2021
og eyes
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF SAN MATEO"
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ll LOUIS PAYCHECK, Case No. 19Civ02595
12 Plaintiff, STATEMENT OF DECISION
13 Vv. Trial Date: May 12, 2021
Dept.:
14 PUNIT K. SARNA, et al. Honorable Nancy L. Fineman
15 Defendants.
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AND RELATED CROSS-ACTION.
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STATEMENT OF DECISION
STATEMENT OF DECISION
On June 7, 2021, this Court issued its Tentative Decision and Proposed Statement of
Decision pursuant to California Rule of Court 3.1590(c), On June 10, 2021, pursuant to the
stipulation of the parties, the Court entered an order regarding Trial Dates/ Procedure Order
regarding the time for objections to the Court’s decision.
On June 16, 2021, defendants Punit K. Sarma and Puja Sarna (“Samas”) filed a Declaration
of Matthew A. Haulk in Support of Post-trial Supplemental Brief and Non-Objection to Proposed
Statement of Decision. On June 18, 2021, Plaintiff Louis’ Paycheck dba European Enterprises
(“Paycheck”) filed Objections to Proposed Statement of Decision and on June 21, 2021 filed an
10 Amendment to Plaintiff's Objections to Proposed Statement of Decision. On June 21, 2021, the
11 Sarnas filed an Amendment to Non-Objection to Proposed Statement of Decision with an
12 accompanying Request for Judicial Notice. No party requested oral argument on the objections.
13 The Court has reviewed the pleadings filed after it issued its Tentative Decision and
14 considered the argument raised therein, grants Sarnas’ Request for Judicial Notice, concurs that oral
15 argument is not needed (see California Rule of Court 3.1590(k)), and therefore, issues this Statement
16 of Decision.
17 L INTRODUCTION
18 This case involves a dispute between a contractor, plaintiff Paycheck, and property owners
19 who hired him to renovate an apartment building, defendants: Punit K. Sarna (“Sarna”) and Puja
20 Sarna (collectively “Sarnas”). By agreement of the parties, the Court bifurcated the legal issue of
21 the application of Business & Professions Code section 7031 (“the licensing trial”) from the jury
22 trial regarding the construction issues.
23 I. PROCEDURAL BACKGROUND
24 A. Operative Pleadings
25 On May 10, 2019, Paycheck filed his complaint seeking monies for unpaid compensation.
26 With their answer filed on July 11, 2019, the Sarnas filed a cross-complaint alleging Paycheck
27 violated numerous provisions of the California Contractors License Law and, as a result, must
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STATEMENT OF DECISION
disgorge all compensation received. On October 9, 2019, the Sarnas filed their First Amended Cross-
Complaint.
By agreement of the parties, the Court tried Sarna’s Sixth Cause of Action based on Business
and Professions Code’section 7031(b), Sarna’s defense to the Complaint based upon Business and
Professions Code section 703 1(a), and Paycheck’s “substantial compliance hearing” under Business
and Professions Code section 703 1(e).
B. Trial
The bifurcated issues were tried to the Court with evidence presénted on May 12, 2021 and
closing argument on May 26, 2021. Richard M. Kelly of Kelly Litigation Group, Inc. represented
10 Paycheck. Matthew A. Haulk of Ragehianti Freitas LLP represented the Sarnas.
11 At trial Sarna, Paycheck, and third-party witness Shannon Sines (“Sines”), owner of SSS
12 Fire Protection of Los Gatos, CA (“SSS Fire”) testified.
13 Cc. Joint Request for Statement of Decision
14 The parties jointly presented the following as the principal controverted issues:
15 1 Was LOUIS PAYCHECK dba EUROPEAN ENTERPRISES a duly licensed
contractor at all times during the performance of that act or contract at 721
16 Rollins Road, Burlingame, CA, which is the subject matter of this action,
pursuant to Business and Professions Code sections 7031(a) and (b)?
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If the court’s analysis is “yes”, no further analysis is required by the court. If the
18 court’s analysis is “no”, proceed to Issue no. 2.
19 2. Was LOUIS PAYCHECK dba EUROPEAN ENTERPRISES in substantial
compliance with licensure requirements pursuant to Business and Professions
20 Code section 703 1(e)?
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If the court’s analysis is “yes”, no further analysis is required by the court. If the
22 court’s analysis is “no”, proceed to Issue no.’s 3 and 4.
23 Is Plaintiff LOUIS PAYCHECK dba EUROPEAN ENTERPRISES’s
Coniplaint, and all causes of action therein, against Defendants PUNIT K.
24 SARNA and PUJA SARNA barred by Business and Professions Code section
25 7031(a)? and, ©
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2.
STATEMENT OF DECISION
4. Is Cross Complainant, PUNIT K. SARNA, to recover all compensation paid to
the unlicensed contractor, LOUIS PAYCHECK dba EUROPEAN
ENTERPRISES, for the performance of any act or contract at 721 Rollins Road,
Burlingame, CA pursuant to Business and Professions Code section 7031(b)? If
yes, what is the amount the court awards.
Joint Request for C.R.C. 3:1950 Statement of Decision filed May 28, 2021.
Ii. STANDARD OF PROOF
The parties agree that Paycheck, whose license was challenged, must provide clear and
convincing evidence that he was “duly licensed in the proper classification of contractors ‘at all
times” during performance of the work. Bus. & Prof. Code § 7031(d); Buzgheia v. Leasco Sierra
Grove (1997) 60 Cal.App.4th 374, 393. Clear and convincing means that the party must persuade
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the trier of fact “that it is highly probable that the fact is true.” CAC] 201.
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The trial court in issuing a Statement of Decision “is required only to state the ultimate rather
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than the evidentiary facts. The statement of decision need do no more than state the grounds upon
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which the judgment rests, without necessarily specifying the particular evidence considered by the
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trial court in reaching its decision.” Jn re Marriage of Williamson (2014) 226 Cal.App.4th 1303,
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1318-19 (citations and internal quotations omitted); see also Richardson v. Franc (2015) 233
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Cal.App.4th 744, 753, n.2 (trial court was not required to make “specific factual findings” on every
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evidentiary point; rather theStatement of Decision need only state grounds for the judgment, without
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necessarily specifying the particular evidence considered by the trial court in reaching its decision).
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IV. FACTUAL BACKGROUND
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The findings of fact in this Statement of Decision are based upon all the evidence both oral
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and documentary, including the credibility of the witnesses. The Court has not identified all the facts
supporting this Decision, but only the ones the Court finds the most material. Husain v. California
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Pacific Bank (2021) 61 Cal.App.Sth 717, 732.
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a.
STATEMENT OF DECISION
A. The Parties
1. Paycheck
Paycheck,! who is 78 years old, has two undergraduate degrees, has been a general contractor
for the last 30 years, and is the owner of European Enterprises, a sole proprietorship. The following
facts about Paycheck’s licensure are undisputed: First, Paycheck, through European Enterprises,
had a general contractor’s license issued by the California Contactors State Licensing Board
(“CSLB”) during all relevant times. Ex. 9. Second, Paycheck’s license was never explicitly
suspended or revoked at any time between January 1, 2017 and the present. Third, Paycheck does
not have the C-16 specialty license to install fire protection sprinklers.
10 2. The Sarnas
11 Sarna is a doctor. He and his sister, Puja Sarna, own a five-unit residential building located
12 at 721 Rollins Road; Burlingame, California (the “property”.
13 B. The Agreement Between the Parties
14 Prior to meeting Paycheck, Sarna interviewed three other contractors. Sarna testified that he
15 asked Paycheck about his employees and that Paycheck responded that he had 14 employees.
16 There was not a signed written agreement between the parties, but both parties agree that an
17 unsigned agreement dated November 12, 2017, Ex. 1, memorialized their agreement. The parties
18 agree that the agreement called for Paycheck to demolish and remodel the apartment building owned
19 by the Sarnas, In the agreement, Paycheck represented that he had workers’ compensation insurance,
20 Ex. 1, p. 2. That representation was false because he did not have workers’ compensation insurance
21 at that time. Ex. 9. Sarna testified that he would not have hired Paycheck if he knew that Paycheck
22 did not have workers’ compensation insurance,
23 c. The Demolition
24 The parties agree that Paycheck was responsible for the demolition at the property and that
25 he used other workers for the demolition, but they disagree on the date that the demolition began.
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27. ' Paycheck testified that he was convicted in 1972 for conspiracy to commit air piracy and that he
served 13 years in prison. Thereafter, he changed his name to Paycheck. These facts were not
28 considered by the Court in its analysis or conclusion.
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STATEMENT OF DECISION
Paycheck testified at trial that the demolition did not start until December, 2017. Sarna, on
the other hand, testified that the demolition started in mid-November, 2017. Sarna’s recollection is
supported by Paycheck’s discovery responses and deposition testimony in which he stated that the
work, including the demolition specifically,’ started in mid-November, 2017. Exs. 28, 30;
deposition transcript at 22:12-29:9.
D. The Renovation of the Apartment Building
Paycheck supervised the renovation of the apartment building with others performing the
work. The work included plumbing, electrical, demolition, and stucco. Ex. 28; Paycheck testimony.
‘Paycheck stopped work in December 2018 after he and Sarna had a disagreement over the remaining
10 work and outstanding payments.”
11 E The Sprinkler System
12 The parties agree that Paycheck did not have the specific license, a C-16 Fire Protection
13 License, required to install fire protection sprinklers and that Paycheck would be hiring someone
14 else to install them.
15 Paycheck hired Jose Carbohol (“Carbohol”) who represented that he was working on behalf
16 of SSS Fire to install the sprinklers. Paycheck had met Carbohol at The Home Depot and Carbohol
17 was driving an SSS Fire truck. Paycheck had used Carbohol to install sprinklers on other projects
18 without incident.
19 The initial November 12, 2017 agreement included installation of a fire sprinkler system.
20 Ex. 1, Paycheck testified that Sarna thought that the cost was too high and that he told Sarna to
21 deal directly with Carbohol. Paycheck also testified that the sprinkler work was not part of the
22 agreement, but that testimony is contradicted by Paycheck’s invoice of July 14, 2018, Ex. 2, which
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23 on page 2 provides: “3. Create drawings and install sprinklers. ..$10,300.00” and the invoice of
24 September 16, 2018, Ex. 3, which on page 1 provides: “3, Fire sprinklers additional Valve
25 purchase and Installation. ..62,700,00,” That testimony is also contrary to Paycheck’s
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27 2 Sama testified about the emotional distress that the last meeting caused, especially because he was
expecting a baby within a short period of time. These facts were not considered by the Court in its
28 analysis or conclusion.
5.
STATEMENT OF DECISION
interrogatory response regarding the scope of his work, which included “plumbing for fire
sprinklers .. . .” Ex, 28 (response to Interrogatory No. 321.2). While Paycheck testified at trial that
he was not seeking reimbursement for the sprinkler installment, his Complaint at paragraph 9
states that the amount owed was $236,900.70, matching the amount represented in the agreement
and change order. Exs. 2,3, 39; see also Exs. 32, 33 (response to request for admission No. 7).
Sines, the owner of SSS Fire, testified that Carbohol was a rogue employee who entered into
numerous agreements to install sprinklers without Sines’ knowledge. Sines let it go because
Carbohol reimbursed the company for those projects. Sines later fired Carbohol. Although the
testimony was somewhat uncléar, the Court concludes that Carbohol was working for SSS Fire at
10 the time the sprinkler installation work was performed at the property. Sines testified that SSS Fire
1 never had a contract to perform any work at the property and that Exhibit 36, the agreement, was
12 forged. He testified that when he received a call to perform the final inspection he did not know
13 about the project, but went to the property nonetheless to assist in obtaining the final sign-off by the
14 Burlingame Fire Department.
15 Sines also testified that he heard that Carbohol explained away Sines’ initial absence from
16 the project by telling others that Sines was dying of COYID-19. Sarna’s counsel correctly pointed
17 out in closing argument that COVID-19 was not known in the United States until early 2020, and
18 therefore the statement could not be true. However, Sarna never questioned Sines about this
19 discrepancy to allow him to explain it. In weighing the evidence and the credibility of the witnesses,
20 the Court finds Sines was a credible witness with specific testimony consistent with the facts of this
21 case, including the property location and Paycheck’s name.
22 F Workers’ Compensation Insurance
23 Paycheck testified that, when needed, he obtained appropridte workers’ compensation
24 insurance or acted promptly and in good faith to obtain it. Sarna disagrees.
25 On June 21, 2017, Paycheck applied for an exemption from the workers’ compensation
26 insurance requirement. Ex. 14. In that application, Paycheck represented that “I do not employ
27 anyone in the manner subject to the workers’ compensation laws of California” and “I also
28 understand that, as soon as I employ anyone subject to the California’s workers’ compensation laws,
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STATEMENT OF DECISION
I must obtain a Certificate of Workers’ Compensation Insurance . . . .” Jd. The exemption was
granted on June 26, 2017. Ex. 9,
In late November after entering into the agreement for this project, Paycheck submitted a
workers’ compensation insurance application, in which he represented that he had a total annual
payroll of $30,000 for carpentry work. Ex. 15. On November 29, 2017, a broker issued a proposal
of insurance. Jd. On December 1, 2017, Paycheck was issued a one-year policy. Ex. 16, The policy
was then cancelled on February 28, 2018 due to non-payment of premiums, Ex. 17, but renewed on
the same day with a different policy number through December 1, 2018. Paycheck testimony; Exs.
19, 20, In the second application, Paycheck represented that he had an annual payroll of $22,685.
10 Ex. 19. In a premium audit covering the period December 1, 2017 through February 28, 2018,
ll Paycheck represented that he had income of $3,782.15 and that his employee Victor Castro was
12 paid $1,281.17 in cash as a cabinet installer. Ex. 18. Paycheck testified that Castro was not an
13 employee, but that in order to obtain workers’ compensation insurance, he needed to show a minimal
14 amount of payroll. On December 1, 2018, the insurance carrier did not renew the insurance due to
15 failure to meet the minimum payroll requirement. Ex. 21.
16 Since Paycheck’s exemption was in effect until he acquired workers’ compensation
17 insurance on December 1, 2017, it is undisputed that for this period from November 12-30, 2017,
18 he did not have workers’ compensation insurance.
19 G Employees/Independent Contractors
20 The parties dispute whether the people who worked for Paycheck were employees or
21 independent contractors.
22 Paycheck testified at trial that he only used independent contractors rather than employees
on the Sarna project, and that he only obtained workers’ compensation insurance to make sure that
24 the Workers were protected.
25 Sarna introduced contrary evidence. During his deposition, Paycheck testified that Edgar
26 Giovani Orrego, Victor Castro and “other guys” who performed the demolition were his
27 employees. Deposition transcript 46:7-48:4. He also testified that he did not hire subcontractors.
28 Deposition transcript 58:17-59:16. In discovery responses, Paycheck also referred to these workers
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STATEMENT OF DECISION
as employees. Exs, 29, 30 (answer to Interrogatory Nos. 23, 24), 31 (amended response to
Interrogatory No. 17). At trial, Paycheck testified that these testimony and discovery responses
were incorrect.
Paycheck also confirmed during cross-examination that he made payments to various
workers. Exs. 5, 6,7, 8.Specifically, the documents demonstrate that in 2018, Paycheck paid Castro
$143,749 (Ex. 8, p. 192) and paid Orrego $332,695 (Ex. 8, p. 196). During the workers’
compensation insurance premium audit period of December 1, 2017 to February 28, 2018,
Paycheck paid Orrego $5,000 on December 8, and $34,880 total. Ex. 6.
Vv. ANALYSIS
10 A contractor is not entitled to any compensation under a private contract unless that
ll contractor is duly licensed at all times during the performance of the work. 9 Miller & Starr,
12 California Real Estate § 31:9 (4th ed, 2020) (“Miller & Starr”). To be duly licensed, a contractor
13 must carry workers’ compensation Insurance, or have a valid exemption. Lab. Code § 3700; Bus. &
14 Prof. Code § 7125. Those who fail to meet one of these requirements may assert a defense of
1S substantial compliance with the licensure requirements. Bus. & Prof. Code § 7301(¢).
16 The harsh noncompliance penalty imposed by the licensure requirement reflects the
17 legislative intent to deter unlicensed contractors from offering ‘their services, and thus protect the
18 public from the “incompetence and dishonesty” of those parties. Hydrotech v. Oasis (1991) 52
19 Cal.3d 988, 995. The Hydrotech court further explained that “[b]ecause of the strength and clarity
20 of this policy, it is well settled that section 7031 applies, despite injustice to the unlicensed
21 contractor” and “that the importance of deterring unlicensed persons from engaging in the
22 contracting business outweighs any harshness between the parties ... .” Id. (emphasis in original).
23 After considering the evidence presented, including the credibility of the witnesses, the
24 Court finds that Paycheck was not a duly licensed contractor at the time he performed work for
25 Sarna, and that he failed to establish the substantial compliance defense set forth in Business and
26 Professions Code section 7031(e).
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STATEMENT OF DECISION
A. Licensure throughout the Project
i. Legal Standard
To be duly licensed, a contractor employing other workers must have a current and valid
Certificate of Workers’ Compensation Insurance at all times. 9 Miller & Starr § 31:9; Bus. & Prof.
Code § 7125. There is a rebuttable presumption that anyone working for a contractor is an employee
and not an independent contractor, thus subjecting the employer to the insurance requirement. Lab.
Code § 2750.5. However, a contractor not employing others may obtain an “exemption” if that
person files a statement to that effect with the CSLB. Bus. & Prof. Code § 7125.
Failure to obtain or maintain workers’ compensation insurance when required, or to obtain
10 an exemption, results in the automatic suspension of a contractor’s license, Jd.; see also Wright v.
11 Issak (2007) 149 Cal. App.4th 1116. Ifa contractor fails to obtain (as opposed to maintain) insurance,
12 his license is suspended effective the day that the coverage should have been obtained. Bus. & Prof.
13 Code § 7125.2. Such a suspension does not require prior notice before taking effect because the
14 CSLB has no way of knowing when a contractor fails to obtain insurance (as opposed to when a
15 contractor fails to maintain a policy already in its system). See Wright, 149 Cal.App.4th 1116, 1122
16 n.2. A contractor who continues to work after a license suspension acts as an unlicensed contractor,
17 may not recover for work performed on a project, and must disgorge all monies received for that
18 work. Bus. & Prof. Code § 7031(b).
19 Here, Sarna does not argue that Paycheck had no contractor’s license during the project, but
20 rather that his license was only facially valid because it was automatically suspended when he hired
21 employees and began work on the Sarna project in November 2017 without workers’ compensation
22 insurance. Sarna also claims that Paycheck’s workers” compensation insurance policy that he
23 obtained after he started work on the project was invalid because he grossly understated his payroll
24 in his application,
25 On the other hand, Paycheck maintains that he held either a valid workers’ compensation
26 policy or exemption at all times during the project, and that his license was never actually suspended
27 by the CSLB. He also claims that he substantially complied with the licensure requirements by
28 satisfying the elements outlined in Business and Professions Code section 7031(€).
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STATEMENT OF DECISION
ii. Relevant Case Law
The parties largely agree on which cases are relevant to the present dispute, but they disagree
on their applicability to this case. ‘The’ cases are described below, along with the parties’ respective
interpretations and points of contention.
(a) Judicial Council ofCalifornia v. Jacobs Facilities
Sarna analogizes Jacobs Facilities to argue that even a short period of non-licensure may
render a contractor’s license suspended, resulting in disgorgement. In Jacobs Facilities, the
defendant was licensed at the time it entered a maintenance and repair contract with the plaintiff.
Judicial Council of California v. Jacobs Facilities, Inc. (2015) 239 Cal.App.4th 882, 889-90. Due
10 to a mix-up during a corporate reorganization, the defendant’s license expired during the contract
Il period. Jd. at 903. The court found that “[b]ecause [Jacobs] Facilities was wialloended foe a portion
12 of the period of its contract performance, its compensation. under the contract is subject to forfeiture
13 under subdivisions (a) and (b) of section 7031.” Jd. at 897, While acknowledging the harshness of
14 the rule, the court reversed the jury’s “attenipt to reach an equitable solution” because “that is the
15 remedy the Legislature has prescribed.” Jd. at 910.
16 (b) Wright v. Issak
17 In Wright, the court found that the plaintiff was not a licensed contractor because his license
18 was automatically suspended for failing to obtain and maintain workers’ compensation insurance
19 despite employing a team of three to five workers. Wright, 149 Cal.App.4th at 1119. The contractor
20 had grossly understated his payroll to the policy provider in his initial application. Id. In subsequent
21 reports, the contractor stated a payroll of zero or nearly zero for the period of time he worked on the
22 defendant’s house and the two years prior. Jd. This included one period where he reported a payroll
23 of $312 while having an actual payroll of $135,000. Jd. The court found that this amounted to failure
24 to obtain workers’ compensation insurance, and that his license was automatically suspended the
25 day he should have obtained such insurance. Jd, at 1121.
26 Sarna argues that Paycheck similarly misrepresented his payroll in obtaining an insurance
27 policy, and therefore had his license automatically suspended by operation of law. Paycheck
28 distinguishes Wright by claiming that in that case, the contractor never had a policy of workers’
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STATEMENT OF DECISION
1\| compensation insurance and intentionally underreported the wages he was paying to avoid the
2 requirement altogether.
3 (c) Loranger v. Jones
4 In Loranger, a contractor hired an unlicensed subcontractor and two minor workers who did
not have work permits. Loranger, 184 Cal.App.4th at 851. The defendants (then cross-
complainants) claimed that. these facts showed that the contractor necessarily had not reported his
workers’ wages properly. Jd. Therefore, they argued, the court should follow Wright and rule that
the contractor failed to obtain insurance, and was subject to disgorgement. Jd. at 851-52, The
Loranger court declined to extend Wright to the point that “‘any’ underreporting of payroll is a
10 failure to ‘obtain’ workers’ compensation insurance even though the contractor has in effect a policy
11 of workers’ compensation insurance covering his/her employees.” /d. at 857. The Loranger court
12 distinguished the Wright opinion based upon the difference in facts. In Loranger, there was
13 insufficient evidence to demonstrate that any unlicensed worker on the project was not covered by
14 Loranger’s workers’ compensation insurance or that the contractor had failed to list required wages
15 on his workers’ compensation insurance. Jd. at 853-854. In contrast, in Wright, there was a pattern
16 and practice of reporting zero or next to zero for every pay period, demonstrating that the
17 underreporting was not inadvertent. Jd. at 855.
18 Paycheck argues that his alleged misreporting of wages similarly does not change the fact
19 that he “always had valid worker’s [sic] compensation coverage, or valid exemption therefrom,
20 covering 2017 and 2018 work on the Saina project.” Sarna distinguishes Loranger by arguing that
21 that case involved a mere de minimis payroll reporting error, and that, unlike in this case, those
22 defendants failed to produce actual evidence of an underreported payroll.
23 (d) Buzgheia v. Leasco Sierra Grove
24 Sarna cites Buzgheia to support attacking a contractor’s facially valid license to find a
25 suspension as a matter of law. In Buzgheia, a commercial construction setting, the plaintiff held a
26 facially valid contractor’s license by employing a “Responsible Managing Employee” (“RME”)
27 who held the required license. See Buzgheia, 60 Cal.App.4th at 380. The court explained that a party
28 to a contract may challenge whether a contractor employed a “sham” RME in order to get around
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the licensing requirement. Jd. at 386. If so, that contractor effectively acted outside its license,
causing the license to be automatically suspended. Jd. at 387.
Sarna claims that, like the plaintiffin Buzgheia, Paycheck held a facially valid contractor’s
license whose validity he may attack by going behind its face. He claims that Paycheck’s license
was automatically suspended because-he acted outside his license by installing a fire sprinkler
system that required'a C-16 license, and did not timely obtain workers’ compensation insurance.
iii. Application of Law to Facts
The Court finds that Paycheck hired employees during the Sarna project without obtaining
workers’ compensation insurance as required, and accordingly, Paycheck’s license was suspended
10 by operation of law. First, after weighing the evidence, including the credibility of witnesses, * the
11 Court finds that work started in mid-November, 2017, as Sarna testified and as Paycheck testified
12 in his deposition. Second, in both deposition testimony and interrogatory responses, Paycheck
13 represented that he hired employees rather than independent ‘contractors. Paycheck failed to rebut
14 the Labor Code § 2750.5 presumption of employees because there were no facts, e.g. showing that
15 a worker was licensed, to rebut the presumption. Third, it is undisputed that Paycheck did not have
16 workers’ compensation insurance during the November 12-30, 2017 time period. Since this was a
17 failure to obtain insurance, the effective suspension date of Paycheck’s license was the first day he
18 employed another worker. Thus, Paycheck worked with a suspended license, at the very least,
19 between the first day of the Sarna demolition and the day he acquired and filed a workers’
20 compensation policy on December 1, 2017. In its objections, Plaintiff attempts to minimize this time
21 period where there was no workers’ compensation insurance. In other instances, this lack of
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This Court, sitting as the trier of fact, having been able to observe in person the esticeey of the
24 witnesses and after reviewing and weighing all the evidence, concludes that Paycheck’s testimony
is not credible. He made inaccurate and conflicting statements in his testimony and discovery
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responses on when work started, whether his workers were employees or contractors, and whether
26 he had workers’ compensation insurance at the start of the project. Thus, taking the evidence as a
whole, this Court disbelieves Paycheck’s trial testimony. While Paycheck tries to isolate his
27 inconsistencies, the Court looks at the evidence as a whole, including having observed him
testifying, to find a pattern and practice of inconsistencies and acting in contravention of his
28 licensing requirements.
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STATEMENT OF DECISION
insurance may compel a different result. However, in this case, Paycheck made an affirmative
misrepresentation in the agreement that he had worker’s compensation insurance. Ex. 1, p. 2.
Paycheck’s representation was knowingly false and, therefore, the Court finds after weighing the
evidence and considering all the factors, that Paycheck’s seeking of insurance after he represented
that he currently possessed it was not in good faith. He obtained the job and began work, including
the dangerous work of demolition knowing he did not have the required workers’ compensation
insurance.
In addition to not acquiring workers’ compensation insurance before starting the Sarna
project, Paycheck significantly mustepresented his payroll when he eventually did obtain apolicy,
10 which is another incident of him not acting in good faith. The Court finds that Paycheck’s
11 underreporting went beyond the minor mistakes in Loranger and was more analogous to the “vast”
12 misrepresentations in Wright, Paycheck, unlike Wright, clearly did receive a facially valid workers’
13 compensation insurance policy starting in December 2017, However, his $30,000 annual payroll
14 estimate in his November 2017 application and $22,685 estimate in his February 2018 application
15 were not remotely comparable to his actual 2018 payroll of $476,444 to Castro and Orrego alone.
16 Ex. 8. For this reason, the Court follows Wright and finds that Paycheck’s license was suspended as
17 a matter of law for significantly underrepresenting his payroll in workers’ compensation insurance
18 applications.
19 Since Paycheck did not have workers’ compensation insurance during the November 12-30,
20 2017 phase of the Sarna project, and thereafter misrepresented his payroll when obtaining insurance,
21 he was not duly licensed for the duration of the Sarna project. This conclusion is supported by the
22 “obvious statutory intent . . . to discourage persons who have failed to comply with the licensing
23 law from offering or providing their unlicensed services for pay.” Hydrotech, 52 Cal.3d at 995, The
24 Court finds that these were not innocent mistakes by Paycheck, but intentional acts to avoid
25 complying with the law.
26 B. C-16 Fire Protection
27 A general contractor shall not contract for any project that includes a fire protection system
28 unless that person holds a C-16 license, or subcontracts with someone who does. Bus. & Prof. Code
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STATEMENT OF DECISION
§ 7057(c); 16 CCR § 832.16. A contractor is barred from recovery if that person “labors at a task
for which he or she has no expertise or license.” Buzgheia, 60 Cal.4th at 386. If that is the case, the
contractor’s license is automatically suspended and the contractor is no longer duly licensed. Jd. at
387.
The parties agree that Paycheck himself did not have a C-16 license. Paycheck argues that
the fire sprinkler work was completed by Carbohol, who worked for SSS Fire, and did have a valid
C-16 license. Sarna contends that Paycheck did not actually subcontract with SSS Fire for the work,
and therefore that Paycheck exceeded the bounds of his license, rendering it suspended.
The Court finds that Paycheck did not act outside of his license in installing the fire
10 protection system. There was substantial credible evidence from Sines at trial that although
ll Carbohol acted without company authorization, SSS Fire through Sines ratified Carbohol’s work
12 and assisted Paycheck in obtaining the final sign-off from theBurlingame Fire Department. Since
13 Paycheck contracted with Carbohol, an employee of SSS Fire with a C-16 license, the Court finds
14 that Paycheck did not act outside of his license in that regard. |
15 c Section 7031(e) Substantial Compliance Provision
16 If a court finds that a contractor did not actually comply with licensure requirements, it may
17 nonetheless find substantial compliance if the contractor (1) had been duly licensed as a contractor
18 in this state prior to the performance of the act or contract, (2) acted reasonably. and in good faith to
19 maintain proper licensure, and (3) acted promptly and in good faith to remedy the failure to comply
20 with the licensure requirements upon learning of the failure. Bus. & Prof. Code § 7031(e).
21 Here, as previously stated, the parties do not dispute that Paycheck held a facially valid
22 license before and during the Sarna project. The dispute centers on whether he was “duly” licensed
23 at that time. Sarna claims that Paycheck was not duly licensed because he “continuously hired and
24 used employees” between the time he filed an exemption in June 2017 and the time he acquired a
25 workers’ compensation insurance policy two weeks into.demolition on the Sarna project. Sarna
26 claims that Paycheck did not act reasonably and in good faith to maintain proper licensure during
27 the project, and that he “knowingly violated the terms of his restricted license by using employees.”
28 He further argues that the November 2017 and February 2018 policies were a series of “sham”
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STATEMENT OF DECISION
policies that Paycheck obtained by underreporting his payroll in order to keep premiums down.
Paycheck argues that alleged violations of his exemption prior to the Sarna project should
not be considered in this matter. He also notes that his license was never explicitly suspended or
revoked by the CSLB while working on the Sarna project. For the period after theinitial Sarna
agreement, Paycheck argues that he acted promptly and in good faith to remedy his lack of workers’
compensation insurance by calling a broker quickly, and securing a valid policy on December 1,
2017. u
i. Application of Law to Facts
The Court finds that Paycheck did not satisfy the aletnents of the substantial compliance
10 defense. The acts of Paycheck prior to November 2017 are relevant to the issue of intent, absence
11 of mistake, state of mind, and knowledge. Simons, California Evidence Manual § 6:1 et. seq. (2021);
12 see Loranger, 184 Cal.App.4th at 855 (referring to the pattern and practice of the contractor in,
13 Wright). The evidence illustrates a history of noncompliance.
by Paycheck. He repeatedly paid
14 employees during his exemption period prior to the Sarna project. For example, two days after
15 receiving an exemption in June 2017, he paid Orrego $4,800. Exs. 7, 9. In total, Paycheck paid
16 Orrego over $46,000 between the time his exemption went into effect, and the time that he obtained
17 workers’ compensation insurance. Ex. 7. Then, in the Sarna agreement, Paycheck falsely
18 represented that his company held a $2 million workers’ compensation policy. Ex. 1 The Court finds
19 that Paycheck was not duly licensed as a contractor in the state prior to the performance of the Sarna
'
20 project.
21 Second, Paycheck did not act in good faith to remedy his failure to comply with the licensure
22 requirement. At the time that he made the representation to Sama in mid-November, 2017 that he
23 had workers’ compensation insurance, Paycheck knew that he was not in compliance with the
24 insurance requirement. This is clear because he sought and obtained a policy after starting the
25 project. In remedying his initial failure to comply with the licensure requirements, however,
26 Paycheck severely underreported his payroll. This is apparént from his November 29, 2017
27 application, his February 2018 audit, and his February 28, 2018 application. In the year following
28 his December 2017 policy, in which he represented that he had a payroll of $30,000, Paycheck payed
“] §2
STATEMENT OF DECISION
over $470,000 to Orrego and Castro alone, an amount more than fifteen times greater than what he
represented. Ex. 7. Paycheck exceeded the $30,000 payroll figure within two weeks of obtaining the
policy. Jd. These misrepresentations went beyond incidental or “de minimis” discrepancies, and
.
instead represent attempts to sidestep the workers’ compensation insurance requirement. Moreover,
in February 2018, Paycheck’s’ policy was canceled for failure to pay his premiums. Paycheck also
argues that there is no evidence that he underreported the payroll, but documents, which were
admitted into evidence, au the underreporting when compared to his payroll checks. Exs. 15, 18,
19 (insurance documents); see Ex. 5-8 (payments). By working on the Sarna project in mid-late
November without workers’ compensation insurance . after promising otherwise, vastly
10 misrepresenting his payroll in subsequent policy applications, and failing to pay his premiums,
ll Paycheck did not act in good faith to remedy his lack of workers’ compensation insurance. Thus, he
12 did not demonstrate substantial compliance with the licensure requirement.
13 Vi. CONCLUSION
14 The. Court finds that Paycheck was not duly licensed at all times during the Sarna project,
15 and did notmeet the substantial compliance requirements of Business and Professions Code section
16 7031(e). Accordingly, Paycheck’s complaint and all causes of action therein against Sama are barred
17 by Business and Professions Code section 703 1(a).
y
18 In its Joint Request for C.R.C. 3.1590 Statement of Decision, the parties jointly asked
19. whether Sarna was ‘entitled to-all compensation that Sarna paid Paycheck pursuant to Business &
20 Professions Code section 7031(b), which provides that “Except as provided in subdivision (e), a
21 person who utilizes the services of an unlicensed contractor may bring an action in any court of
22 competent jurisdiction in this state to recover all compensation paid to the unlicensed contractor for
23 performance ‘of any act or contract.” For the first time, Paycheck now claims that the statute of
24 limitations bars this claim. Amendment to Plaintiff's Objections to Proposed Statement of Decision
25 at 2. This claim must fail. First, Paycheck failed to request that the Court address the issue in the
26 Statement of Decision, thus he is deemed to have waived it. City of Coachella v. Riverside County
27 Airport Land Use Com. (1989) 210 Cal.App.3d 1277, 1292. Second, Paycheck waived any statute
28 of limitations defense because he did not assert it in his answer. Minton v. Cavaney (1961) 56 Cal.2d
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STATEMENT OF DECISION
576, 581, Third, even if the defense is considered on the merits, it fails. Based upon the stipulation
of the Sarnas and Paycheck, supported by Sarna’s trial testimony (152:13-152;:25), the amount Sarna
paid Paycheck is $228,330.63, which is the amount to be repaid by Paycheck to the Sarnas.
There are still outstanding causes of action in this case. Therefore, it would be premature to
enter judgment at this time. Accordingly, pursuant to. California Rule of Court 3.1590(f),(m), the
Court extends the time for submission of a proposed judgment until after the other claims are
resolved,
IT IS SO ORDERED:
Dated: June 30, 2021
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10 TAN baa INEM
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SatrMateo County
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STATEMENT OF DECISION
EXHIBIT 2
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Amount Sequence Number: 9592347739
Account Capture Date: 12/12/2017
Bank Number: 12100035 Check Number: 1190
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Electronically MATTHEW A. HAULK (SBN: 272457) by Superior Court of California, County of San Mateo RAGGHIANTI FREITAS LLP ON 8/17/2021 1101 Fifth Avenue, Suite 100 San Rafael, California 94901 By. Is Marcela Enriquez Telephone: (415) 453-9433 Facsimile: (415) 453-8269 Attorneys for Defendants PUNIT K. SARNA and PUJA SARNA SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SAN MATEO 10 LOUIS PAYCHECK, CASE NO.: 19CIV02595 11 Plaintiff, DECLARATION OF MATTHEW A. 12 HAULK IN SUPPORT OF MOTION FOR Vs. PREJUDGMENT INTEREST 13, PUNIT K. SARNA, et al., DATE: October 12, 2021 14 TIME: 2:00 p.m. Defendants. DEPT.: 4 15 COURTROOM: N 16 JUDGE: Hon. Nancy L. Fineman 17 AND RELATED CROSS-ACTION. Complaint Filed: May 10, 2019 Trial: May 12, 2021 18 19 20 |, Matthew A. Haulk, declare: 1 21 | am a partner with Ragghianti Freitas, LLP, an attorney duly admitted to 22 practice before the Court and all of the Courts of the State of California, and counsel of 23 record for Punit Sarna and Puja Sarna. | have personal knowledge of the information set 24 forth herein below, unless noted as based on information and belief, all of which is true 25 and correct of my own personal knowledge, and if called upon to testify, | could and 26 would competently testify thereto. 27 2. On June 30, 2021, the Statement of Decision for this action was filed in San 28 Mateo Superior Court. A true and correct copy of the aforesaid Statement of Decision is attached hereto as Exhibit 1. DECLARATION OF MATTHEW A. HAULK IN SUPPORT OF MOTION FOR PREJUDGMENT INTEREST 3 The parties stipulated to the authenticity of the trial exhibits for the Phase 1 Trial of this action, including Trial Exhibit 4, a copy of the checks that Sarna wrote to Paycheck for this project. A true and correct copy of Trial Exhibit 4 is attached hereto as Exhibit 2. 4 A true and correct copy of Punit Sarna’s First Amended Cross-Complaint is attached hereto as Exhibit 3. | declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct. Executed this 17th day of August 2021, at San Rafael, 10 California. N— Matthew A. Haulk 1 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DECLARATION OF MATTHEW A. HAULK IN SUPPORT OF MOTION FOR PREJUDGMENT INTEREST EXHIBIT 1 FILED SAN MATEO COUNTY JUN 8 0 2021 og eyes SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SAN MATEO" 10 ll LOUIS PAYCHECK, Case No. 19Civ02595 12 Plaintiff, STATEMENT OF DECISION 13 Vv. Trial Date: May 12, 2021 Dept.: 14 PUNIT K. SARNA, et al. Honorable Nancy L. Fineman 15 Defendants. 16 AND RELATED CROSS-ACTION. 1 18 19 20 21 22 23 24 25 26 27 28 STATEMENT OF DECISION STATEMENT OF DECISION On June 7, 2021, this Court issued its Tentative Decision and Proposed Statement of Decision pursuant to California Rule of Court 3.1590(c), On June 10, 2021, pursuant to the stipulation of the parties, the Court entered an order regarding Trial Dates/ Procedure Order regarding the time for objections to the Court’s decision. On June 16, 2021, defendants Punit K. Sarma and Puja Sarna (“Samas”) filed a Declaration of Matthew A. Haulk in Support of Post-trial Supplemental Brief and Non-Objection to Proposed Statement of Decision. On June 18, 2021, Plaintiff Louis’ Paycheck dba European Enterprises (“Paycheck”) filed Objections to Proposed Statement of Decision and on June 21, 2021 filed an 10 Amendment to Plaintiff's Objections to Proposed Statement of Decision. On June 21, 2021, the 11 Sarnas filed an Amendment to Non-Objection to Proposed Statement of Decision with an 12 accompanying Request for Judicial Notice. No party requested oral argument on the objections. 13 The Court has reviewed the pleadings filed after it issued its Tentative Decision and 14 considered the argument raised therein, grants Sarnas’ Request for Judicial Notice, concurs that oral 15 argument is not needed (see California Rule of Court 3.1590(k)), and therefore, issues this Statement 16 of Decision. 17 L INTRODUCTION 18 This case involves a dispute between a contractor, plaintiff Paycheck, and property owners 19 who hired him to renovate an apartment building, defendants: Punit K. Sarna (“Sarna”) and Puja 20 Sarna (collectively “Sarnas”). By agreement of the parties, the Court bifurcated the legal issue of 21 the application of Business & Professions Code section 7031 (“the licensing trial”) from the jury 22 trial regarding the construction issues. 23 I. PROCEDURAL BACKGROUND 24 A. Operative Pleadings 25 On May 10, 2019, Paycheck filed his complaint seeking monies for unpaid compensation. 26 With their answer filed on July 11, 2019, the Sarnas filed a cross-complaint alleging Paycheck 27 violated numerous provisions of the California Contractors License Law and, as a result, must 28 -l- STATEMENT OF DECISION disgorge all compensation received. On October 9, 2019, the Sarnas filed their First Amended Cross- Complaint. By agreement of the parties, the Court tried Sarna’s Sixth Cause of Action based on Business and Professions Code’section 7031(b), Sarna’s defense to the Complaint based upon Business and Professions Code section 703 1(a), and Paycheck’s “substantial compliance hearing” under Business and Professions Code section 703 1(e). B. Trial The bifurcated issues were tried to the Court with evidence presénted on May 12, 2021 and closing argument on May 26, 2021. Richard M. Kelly of Kelly Litigation Group, Inc. represented 10 Paycheck. Matthew A. Haulk of Ragehianti Freitas LLP represented the Sarnas. 11 At trial Sarna, Paycheck, and third-party witness Shannon Sines (“Sines”), owner of SSS 12 Fire Protection of Los Gatos, CA (“SSS Fire”) testified. 13 Cc. Joint Request for Statement of Decision 14 The parties jointly presented the following as the principal controverted issues: 15 1 Was LOUIS PAYCHECK dba EUROPEAN ENTERPRISES a duly licensed contractor at all times during the performance of that act or contract at 721 16 Rollins Road, Burlingame, CA, which is the subject matter of this action, pursuant to Business and Professions Code sections 7031(a) and (b)? 17 If the court’s analysis is “yes”, no further analysis is required by the court. If the 18 court’s analysis is “no”, proceed to Issue no. 2. 19 2. Was LOUIS PAYCHECK dba EUROPEAN ENTERPRISES in substantial compliance with licensure requirements pursuant to Business and Professions 20 Code section 703 1(e)? 21 If the court’s analysis is “yes”, no further analysis is required by the court. If the 22 court’s analysis is “no”, proceed to Issue no.’s 3 and 4. 23 Is Plaintiff LOUIS PAYCHECK dba EUROPEAN ENTERPRISES’s Coniplaint, and all causes of action therein, against Defendants PUNIT K. 24 SARNA and PUJA SARNA barred by Business and Professions Code section 25 7031(a)? and, © 26 27 NII Ml 28 2. STATEMENT OF DECISION 4. Is Cross Complainant, PUNIT K. SARNA, to recover all compensation paid to the unlicensed contractor, LOUIS PAYCHECK dba EUROPEAN ENTERPRISES, for the performance of any act or contract at 721 Rollins Road, Burlingame, CA pursuant to Business and Professions Code section 7031(b)? If yes, what is the amount the court awards. Joint Request for C.R.C. 3:1950 Statement of Decision filed May 28, 2021. Ii. STANDARD OF PROOF The parties agree that Paycheck, whose license was challenged, must provide clear and convincing evidence that he was “duly licensed in the proper classification of contractors ‘at all times” during performance of the work. Bus. & Prof. Code § 7031(d); Buzgheia v. Leasco Sierra Grove (1997) 60 Cal.App.4th 374, 393. Clear and convincing means that the party must persuade 10 the trier of fact “that it is highly probable that the fact is true.” CAC] 201. 11 The trial court in issuing a Statement of Decision “is required only to state the ultimate rather 12 than the evidentiary facts. The statement of decision need do no more than state the grounds upon 13 which the judgment rests, without necessarily specifying the particular evidence considered by the 14 trial court in reaching its decision.” Jn re Marriage of Williamson (2014) 226 Cal.App.4th 1303, 15 1318-19 (citations and internal quotations omitted); see also Richardson v. Franc (2015) 233 16 Cal.App.4th 744, 753, n.2 (trial court was not required to make “specific factual findings” on every 17 evidentiary point; rather theStatement of Decision need only state grounds for the judgment, without 18 necessarily specifying the particular evidence considered by the trial court in reaching its decision). 19 IV. FACTUAL BACKGROUND 20 The findings of fact in this Statement of Decision are based upon all the evidence both oral 21 and documentary, including the credibility of the witnesses. The Court has not identified all the facts supporting this Decision, but only the ones the Court finds the most material. Husain v. California 23 Pacific Bank (2021) 61 Cal.App.Sth 717, 732. 24 25 26 MW 27 M 28 a. STATEMENT OF DECISION A. The Parties 1. Paycheck Paycheck,! who is 78 years old, has two undergraduate degrees, has been a general contractor for the last 30 years, and is the owner of European Enterprises, a sole proprietorship. The following facts about Paycheck’s licensure are undisputed: First, Paycheck, through European Enterprises, had a general contractor’s license issued by the California Contactors State Licensing Board (“CSLB”) during all relevant times. Ex. 9. Second, Paycheck’s license was never explicitly suspended or revoked at any time between January 1, 2017 and the present. Third, Paycheck does not have the C-16 specialty license to install fire protection sprinklers. 10 2. The Sarnas 11 Sarna is a doctor. He and his sister, Puja Sarna, own a five-unit residential building located 12 at 721 Rollins Road; Burlingame, California (the “property”. 13 B. The Agreement Between the Parties 14 Prior to meeting Paycheck, Sarna interviewed three other contractors. Sarna testified that he 15 asked Paycheck about his employees and that Paycheck responded that he had 14 employees. 16 There was not a signed written agreement between the parties, but both parties agree that an 17 unsigned agreement dated November 12, 2017, Ex. 1, memorialized their agreement. The parties 18 agree that the agreement called for Paycheck to demolish and remodel the apartment building owned 19 by the Sarnas, In the agreement, Paycheck represented that he had workers’ compensation insurance, 20 Ex. 1, p. 2. That representation was false because he did not have workers’ compensation insurance 21 at that time. Ex. 9. Sarna testified that he would not have hired Paycheck if he knew that Paycheck 22 did not have workers’ compensation insurance, 23 c. The Demolition 24 The parties agree that Paycheck was responsible for the demolition at the property and that 25 he used other workers for the demolition, but they disagree on the date that the demolition began. 26 27. ' Paycheck testified that he was convicted in 1972 for conspiracy to commit air piracy and that he served 13 years in prison. Thereafter, he changed his name to Paycheck. These facts were not 28 considered by the Court in its analysis or conclusion. 4 STATEMENT OF DECISION Paycheck testified at trial that the demolition did not start until December, 2017. Sarna, on the other hand, testified that the demolition started in mid-November, 2017. Sarna’s recollection is supported by Paycheck’s discovery responses and deposition testimony in which he stated that the work, including the demolition specifically,’ started in mid-November, 2017. Exs. 28, 30; deposition transcript at 22:12-29:9. D. The Renovation of the Apartment Building Paycheck supervised the renovation of the apartment building with others performing the work. The work included plumbing, electrical, demolition, and stucco. Ex. 28; Paycheck testimony. ‘Paycheck stopped work in December 2018 after he and Sarna had a disagreement over the remaining 10 work and outstanding payments.” 11 E The Sprinkler System 12 The parties agree that Paycheck did not have the specific license, a C-16 Fire Protection 13 License, required to install fire protection sprinklers and that Paycheck would be hiring someone 14 else to install them. 15 Paycheck hired Jose Carbohol (“Carbohol”) who represented that he was working on behalf 16 of SSS Fire to install the sprinklers. Paycheck had met Carbohol at The Home Depot and Carbohol 17 was driving an SSS Fire truck. Paycheck had used Carbohol to install sprinklers on other projects 18 without incident. 19 The initial November 12, 2017 agreement included installation of a fire sprinkler system. 20 Ex. 1, Paycheck testified that Sarna thought that the cost was too high and that he told Sarna to 21 deal directly with Carbohol. Paycheck also testified that the sprinkler work was not part of the 22 agreement, but that testimony is contradicted by Paycheck’s invoice of July 14, 2018, Ex. 2, which i 23 on page 2 provides: “3. Create drawings and install sprinklers. ..$10,300.00” and the invoice of 24 September 16, 2018, Ex. 3, which on page 1 provides: “3, Fire sprinklers additional Valve 25 purchase and Installation. ..62,700,00,” That testimony is also contrary to Paycheck’s 26 27 2 Sama testified about the emotional distress that the last meeting caused, especially because he was expecting a baby within a short period of time. These facts were not considered by the Court in its 28 analysis or conclusion. 5. STATEMENT OF DECISION interrogatory response regarding the scope of his work, which included “plumbing for fire sprinklers .. . .” Ex, 28 (response to Interrogatory No. 321.2). While Paycheck testified at trial that he was not seeking reimbursement for the sprinkler installment, his Complaint at paragraph 9 states that the amount owed was $236,900.70, matching the amount represented in the agreement and change order. Exs. 2,3, 39; see also Exs. 32, 33 (response to request for admission No. 7). Sines, the owner of SSS Fire, testified that Carbohol was a rogue employee who entered into numerous agreements to install sprinklers without Sines’ knowledge. Sines let it go because Carbohol reimbursed the company for those projects. Sines later fired Carbohol. Although the testimony was somewhat uncléar, the Court concludes that Carbohol was working for SSS Fire at 10 the time the sprinkler installation work was performed at the property. Sines testified that SSS Fire 1 never had a contract to perform any work at the property and that Exhibit 36, the agreement, was 12 forged. He testified that when he received a call to perform the final inspection he did not know 13 about the project, but went to the property nonetheless to assist in obtaining the final sign-off by the 14 Burlingame Fire Department. 15 Sines also testified that he heard that Carbohol explained away Sines’ initial absence from 16 the project by telling others that Sines was dying of COYID-19. Sarna’s counsel correctly pointed 17 out in closing argument that COVID-19 was not known in the United States until early 2020, and 18 therefore the statement could not be true. However, Sarna never questioned Sines about this 19 discrepancy to allow him to explain it. In weighing the evidence and the credibility of the witnesses, 20 the Court finds Sines was a credible witness with specific testimony consistent with the facts of this 21 case, including the property location and Paycheck’s name. 22 F Workers’ Compensation Insurance 23 Paycheck testified that, when needed, he obtained appropridte workers’ compensation 24 insurance or acted promptly and in good faith to obtain it. Sarna disagrees. 25 On June 21, 2017, Paycheck applied for an exemption from the workers’ compensation 26 insurance requirement. Ex. 14. In that application, Paycheck represented that “I do not employ 27 anyone in the manner subject to the workers’ compensation laws of California” and “I also 28 understand that, as soon as I employ anyone subject to the California’s workers’ compensation laws, 6- STATEMENT OF DECISION I must obtain a Certificate of Workers’ Compensation Insurance . . . .” Jd. The exemption was granted on June 26, 2017. Ex. 9, In late November after entering into the agreement for this project, Paycheck submitted a workers’ compensation insurance application, in which he represented that he had a total annual payroll of $30,000 for carpentry work. Ex. 15. On November 29, 2017, a broker issued a proposal of insurance. Jd. On December 1, 2017, Paycheck was issued a one-year policy. Ex. 16, The policy was then cancelled on February 28, 2018 due to non-payment of premiums, Ex. 17, but renewed on the same day with a different policy number through December 1, 2018. Paycheck testimony; Exs. 19, 20, In the second application, Paycheck represented that he had an annual payroll of $22,685. 10 Ex. 19. In a premium audit covering the period December 1, 2017 through February 28, 2018, ll Paycheck represented that he had income of $3,782.15 and that his employee Victor Castro was 12 paid $1,281.17 in cash as a cabinet installer. Ex. 18. Paycheck testified that Castro was not an 13 employee, but that in order to obtain workers’ compensation insurance, he needed to show a minimal 14 amount of payroll. On December 1, 2018, the insurance carrier did not renew the insurance due to 15 failure to meet the minimum payroll requirement. Ex. 21. 16 Since Paycheck’s exemption was in effect until he acquired workers’ compensation 17 insurance on December 1, 2017, it is undisputed that for this period from November 12-30, 2017, 18 he did not have workers’ compensation insurance. 19 G Employees/Independent Contractors 20 The parties dispute whether the people who worked for Paycheck were employees or 21 independent contractors. 22 Paycheck testified at trial that he only used independent contractors rather than employees on the Sarna project, and that he only obtained workers’ compensation insurance to make sure that 24 the Workers were protected. 25 Sarna introduced contrary evidence. During his deposition, Paycheck testified that Edgar 26 Giovani Orrego, Victor Castro and “other guys” who performed the demolition were his 27 employees. Deposition transcript 46:7-48:4. He also testified that he did not hire subcontractors. 28 Deposition transcript 58:17-59:16. In discovery responses, Paycheck also referred to these workers «7- STATEMENT OF DECISION as employees. Exs, 29, 30 (answer to Interrogatory Nos. 23, 24), 31 (amended response to Interrogatory No. 17). At trial, Paycheck testified that these testimony and discovery responses were incorrect. Paycheck also confirmed during cross-examination that he made payments to various workers. Exs. 5, 6,7, 8.Specifically, the documents demonstrate that in 2018, Paycheck paid Castro $143,749 (Ex. 8, p. 192) and paid Orrego $332,695 (Ex. 8, p. 196). During the workers’ compensation insurance premium audit period of December 1, 2017 to February 28, 2018, Paycheck paid Orrego $5,000 on December 8, and $34,880 total. Ex. 6. Vv. ANALYSIS 10 A contractor is not entitled to any compensation under a private contract unless that ll contractor is duly licensed at all times during the performance of the work. 9 Miller & Starr, 12 California Real Estate § 31:9 (4th ed, 2020) (“Miller & Starr”). To be duly licensed, a contractor 13 must carry workers’ compensation Insurance, or have a valid exemption. Lab. Code § 3700; Bus. & 14 Prof. Code § 7125. Those who fail to meet one of these requirements may assert a defense of 1S substantial compliance with the licensure requirements. Bus. & Prof. Code § 7301(¢). 16 The harsh noncompliance penalty imposed by the licensure requirement reflects the 17 legislative intent to deter unlicensed contractors from offering ‘their services, and thus protect the 18 public from the “incompetence and dishonesty” of those parties. Hydrotech v. Oasis (1991) 52 19 Cal.3d 988, 995. The Hydrotech court further explained that “[b]ecause of the strength and clarity 20 of this policy, it is well settled that section 7031 applies, despite injustice to the unlicensed 21 contractor” and “that the importance of deterring unlicensed persons from engaging in the 22 contracting business outweighs any harshness between the parties ... .” Id. (emphasis in original). 23 After considering the evidence presented, including the credibility of the witnesses, the 24 Court finds that Paycheck was not a duly licensed contractor at the time he performed work for 25 Sarna, and that he failed to establish the substantial compliance defense set forth in Business and 26 Professions Code section 7031(e). 27 28 Mt -8- STATEMENT OF DECISION A. Licensure throughout the Project i. Legal Standard To be duly licensed, a contractor employing other workers must have a current and valid Certificate of Workers’ Compensation Insurance at all times. 9 Miller & Starr § 31:9; Bus. & Prof. Code § 7125. There is a rebuttable presumption that anyone working for a contractor is an employee and not an independent contractor, thus subjecting the employer to the insurance requirement. Lab. Code § 2750.5. However, a contractor not employing others may obtain an “exemption” if that person files a statement to that effect with the CSLB. Bus. & Prof. Code § 7125. Failure to obtain or maintain workers’ compensation insurance when required, or to obtain 10 an exemption, results in the automatic suspension of a contractor’s license, Jd.; see also Wright v. 11 Issak (2007) 149 Cal. App.4th 1116. Ifa contractor fails to obtain (as opposed to maintain) insurance, 12 his license is suspended effective the day that the coverage should have been obtained. Bus. & Prof. 13 Code § 7125.2. Such a suspension does not require prior notice before taking effect because the 14 CSLB has no way of knowing when a contractor fails to obtain insurance (as opposed to when a 15 contractor fails to maintain a policy already in its system). See Wright, 149 Cal.App.4th 1116, 1122 16 n.2. A contractor who continues to work after a license suspension acts as an unlicensed contractor, 17 may not recover for work performed on a project, and must disgorge all monies received for that 18 work. Bus. & Prof. Code § 7031(b). 19 Here, Sarna does not argue that Paycheck had no contractor’s license during the project, but 20 rather that his license was only facially valid because it was automatically suspended when he hired 21 employees and began work on the Sarna project in November 2017 without workers’ compensation 22 insurance. Sarna also claims that Paycheck’s workers” compensation insurance policy that he 23 obtained after he started work on the project was invalid because he grossly understated his payroll 24 in his application, 25 On the other hand, Paycheck maintains that he held either a valid workers’ compensation 26 policy or exemption at all times during the project, and that his license was never actually suspended 27 by the CSLB. He also claims that he substantially complied with the licensure requirements by 28 satisfying the elements outlined in Business and Professions Code section 7031(€). -9- STATEMENT OF DECISION ii. Relevant Case Law The parties largely agree on which cases are relevant to the present dispute, but they disagree on their applicability to this case. ‘The’ cases are described below, along with the parties’ respective interpretations and points of contention. (a) Judicial Council ofCalifornia v. Jacobs Facilities Sarna analogizes Jacobs Facilities to argue that even a short period of non-licensure may render a contractor’s license suspended, resulting in disgorgement. In Jacobs Facilities, the defendant was licensed at the time it entered a maintenance and repair contract with the plaintiff. Judicial Council of California v. Jacobs Facilities, Inc. (2015) 239 Cal.App.4th 882, 889-90. Due 10 to a mix-up during a corporate reorganization, the defendant’s license expired during the contract Il period. Jd. at 903. The court found that “[b]ecause [Jacobs] Facilities was wialloended foe a portion 12 of the period of its contract performance, its compensation. under the contract is subject to forfeiture 13 under subdivisions (a) and (b) of section 7031.” Jd. at 897, While acknowledging the harshness of 14 the rule, the court reversed the jury’s “attenipt to reach an equitable solution” because “that is the 15 remedy the Legislature has prescribed.” Jd. at 910. 16 (b) Wright v. Issak 17 In Wright, the court found that the plaintiff was not a licensed contractor because his license 18 was automatically suspended for failing to obtain and maintain workers’ compensation insurance 19 despite employing a team of three to five workers. Wright, 149 Cal.App.4th at 1119. The contractor 20 had grossly understated his payroll to the policy provider in his initial application. Id. In subsequent 21 reports, the contractor stated a payroll of zero or nearly zero for the period of time he worked on the 22 defendant’s house and the two years prior. Jd. This included one period where he reported a payroll 23 of $312 while having an actual payroll of $135,000. Jd. The court found that this amounted to failure 24 to obtain workers’ compensation insurance, and that his license was automatically suspended the 25 day he should have obtained such insurance. Jd, at 1121. 26 Sarna argues that Paycheck similarly misrepresented his payroll in obtaining an insurance 27 policy, and therefore had his license automatically suspended by operation of law. Paycheck 28 distinguishes Wright by claiming that in that case, the contractor never had a policy of workers’ -10- STATEMENT OF DECISION 1\| compensation insurance and intentionally underreported the wages he was paying to avoid the 2 requirement altogether. 3 (c) Loranger v. Jones 4 In Loranger, a contractor hired an unlicensed subcontractor and two minor workers who did not have work permits. Loranger, 184 Cal.App.4th at 851. The defendants (then cross- complainants) claimed that. these facts showed that the contractor necessarily had not reported his workers’ wages properly. Jd. Therefore, they argued, the court should follow Wright and rule that the contractor failed to obtain insurance, and was subject to disgorgement. Jd. at 851-52, The Loranger court declined to extend Wright to the point that “‘any’ underreporting of payroll is a 10 failure to ‘obtain’ workers’ compensation insurance even though the contractor has in effect a policy 11 of workers’ compensation insurance covering his/her employees.” /d. at 857. The Loranger court 12 distinguished the Wright opinion based upon the difference in facts. In Loranger, there was 13 insufficient evidence to demonstrate that any unlicensed worker on the project was not covered by 14 Loranger’s workers’ compensation insurance or that the contractor had failed to list required wages 15 on his workers’ compensation insurance. Jd. at 853-854. In contrast, in Wright, there was a pattern 16 and practice of reporting zero or next to zero for every pay period, demonstrating that the 17 underreporting was not inadvertent. Jd. at 855. 18 Paycheck argues that his alleged misreporting of wages similarly does not change the fact 19 that he “always had valid worker’s [sic] compensation coverage, or valid exemption therefrom, 20 covering 2017 and 2018 work on the Saina project.” Sarna distinguishes Loranger by arguing that 21 that case involved a mere de minimis payroll reporting error, and that, unlike in this case, those 22 defendants failed to produce actual evidence of an underreported payroll. 23 (d) Buzgheia v. Leasco Sierra Grove 24 Sarna cites Buzgheia to support attacking a contractor’s facially valid license to find a 25 suspension as a matter of law. In Buzgheia, a commercial construction setting, the plaintiff held a 26 facially valid contractor’s license by employing a “Responsible Managing Employee” (“RME”) 27 who held the required license. See Buzgheia, 60 Cal.App.4th at 380. The court explained that a party 28 to a contract may challenge whether a contractor employed a “sham” RME in order to get around -ll- STATEMENT OF DECISION the licensing requirement. Jd. at 386. If so, that contractor effectively acted outside its license, causing the license to be automatically suspended. Jd. at 387. Sarna claims that, like the plaintiffin Buzgheia, Paycheck held a facially valid contractor’s license whose validity he may attack by going behind its face. He claims that Paycheck’s license was automatically suspended because-he acted outside his license by installing a fire sprinkler system that required'a C-16 license, and did not timely obtain workers’ compensation insurance. iii. Application of Law to Facts The Court finds that Paycheck hired employees during the Sarna project without obtaining workers’ compensation insurance as required, and accordingly, Paycheck’s license was suspended 10 by operation of law. First, after weighing the evidence, including the credibility of witnesses, * the 11 Court finds that work started in mid-November, 2017, as Sarna testified and as Paycheck testified 12 in his deposition. Second, in both deposition testimony and interrogatory responses, Paycheck 13 represented that he hired employees rather than independent ‘contractors. Paycheck failed to rebut 14 the Labor Code § 2750.5 presumption of employees because there were no facts, e.g. showing that 15 a worker was licensed, to rebut the presumption. Third, it is undisputed that Paycheck did not have 16 workers’ compensation insurance during the November 12-30, 2017 time period. Since this was a 17 failure to obtain insurance, the effective suspension date of Paycheck’s license was the first day he 18 employed another worker. Thus, Paycheck worked with a suspended license, at the very least, 19 between the first day of the Sarna demolition and the day he acquired and filed a workers’ 20 compensation policy on December 1, 2017. In its objections, Plaintiff attempts to minimize this time 21 period where there was no workers’ compensation insurance. In other instances, this lack of 22 23 This Court, sitting as the trier of fact, having been able to observe in person the esticeey of the 24 witnesses and after reviewing and weighing all the evidence, concludes that Paycheck’s testimony is not credible. He made inaccurate and conflicting statements in his testimony and discovery 25 responses on when work started, whether his workers were employees or contractors, and whether 26 he had workers’ compensation insurance at the start of the project. Thus, taking the evidence as a whole, this Court disbelieves Paycheck’s trial testimony. While Paycheck tries to isolate his 27 inconsistencies, the Court looks at the evidence as a whole, including having observed him testifying, to find a pattern and practice of inconsistencies and acting in contravention of his 28 licensing requirements. -12- STATEMENT OF DECISION insurance may compel a different result. However, in this case, Paycheck made an affirmative misrepresentation in the agreement that he had worker’s compensation insurance. Ex. 1, p. 2. Paycheck’s representation was knowingly false and, therefore, the Court finds after weighing the evidence and considering all the factors, that Paycheck’s seeking of insurance after he represented that he currently possessed it was not in good faith. He obtained the job and began work, including the dangerous work of demolition knowing he did not have the required workers’ compensation insurance. In addition to not acquiring workers’ compensation insurance before starting the Sarna project, Paycheck significantly mustepresented his payroll when he eventually did obtain apolicy, 10 which is another incident of him not acting in good faith. The Court finds that Paycheck’s 11 underreporting went beyond the minor mistakes in Loranger and was more analogous to the “vast” 12 misrepresentations in Wright, Paycheck, unlike Wright, clearly did receive a facially valid workers’ 13 compensation insurance policy starting in December 2017, However, his $30,000 annual payroll 14 estimate in his November 2017 application and $22,685 estimate in his February 2018 application 15 were not remotely comparable to his actual 2018 payroll of $476,444 to Castro and Orrego alone. 16 Ex. 8. For this reason, the Court follows Wright and finds that Paycheck’s license was suspended as 17 a matter of law for significantly underrepresenting his payroll in workers’ compensation insurance 18 applications. 19 Since Paycheck did not have workers’ compensation insurance during the November 12-30, 20 2017 phase of the Sarna project, and thereafter misrepresented his payroll when obtaining insurance, 21 he was not duly licensed for the duration of the Sarna project. This conclusion is supported by the 22 “obvious statutory intent . . . to discourage persons who have failed to comply with the licensing 23 law from offering or providing their unlicensed services for pay.” Hydrotech, 52 Cal.3d at 995, The 24 Court finds that these were not innocent mistakes by Paycheck, but intentional acts to avoid 25 complying with the law. 26 B. C-16 Fire Protection 27 A general contractor shall not contract for any project that includes a fire protection system 28 unless that person holds a C-16 license, or subcontracts with someone who does. Bus. & Prof. Code -13- STATEMENT OF DECISION § 7057(c); 16 CCR § 832.16. A contractor is barred from recovery if that person “labors at a task for which he or she has no expertise or license.” Buzgheia, 60 Cal.4th at 386. If that is the case, the contractor’s license is automatically suspended and the contractor is no longer duly licensed. Jd. at 387. The parties agree that Paycheck himself did not have a C-16 license. Paycheck argues that the fire sprinkler work was completed by Carbohol, who worked for SSS Fire, and did have a valid C-16 license. Sarna contends that Paycheck did not actually subcontract with SSS Fire for the work, and therefore that Paycheck exceeded the bounds of his license, rendering it suspended. The Court finds that Paycheck did not act outside of his license in installing the fire 10 protection system. There was substantial credible evidence from Sines at trial that although ll Carbohol acted without company authorization, SSS Fire through Sines ratified Carbohol’s work 12 and assisted Paycheck in obtaining the final sign-off from theBurlingame Fire Department. Since 13 Paycheck contracted with Carbohol, an employee of SSS Fire with a C-16 license, the Court finds 14 that Paycheck did not act outside of his license in that regard. | 15 c Section 7031(e) Substantial Compliance Provision 16 If a court finds that a contractor did not actually comply with licensure requirements, it may 17 nonetheless find substantial compliance if the contractor (1) had been duly licensed as a contractor 18 in this state prior to the performance of the act or contract, (2) acted reasonably. and in good faith to 19 maintain proper licensure, and (3) acted promptly and in good faith to remedy the failure to comply 20 with the licensure requirements upon learning of the failure. Bus. & Prof. Code § 7031(e). 21 Here, as previously stated, the parties do not dispute that Paycheck held a facially valid 22 license before and during the Sarna project. The dispute centers on whether he was “duly” licensed 23 at that time. Sarna claims that Paycheck was not duly licensed because he “continuously hired and 24 used employees” between the time he filed an exemption in June 2017 and the time he acquired a 25 workers’ compensation insurance policy two weeks into.demolition on the Sarna project. Sarna 26 claims that Paycheck did not act reasonably and in good faith to maintain proper licensure during 27 the project, and that he “knowingly violated the terms of his restricted license by using employees.” 28 He further argues that the November 2017 and February 2018 policies were a series of “sham” “14 STATEMENT OF DECISION policies that Paycheck obtained by underreporting his payroll in order to keep premiums down. Paycheck argues that alleged violations of his exemption prior to the Sarna project should not be considered in this matter. He also notes that his license was never explicitly suspended or revoked by the CSLB while working on the Sarna project. For the period after theinitial Sarna agreement, Paycheck argues that he acted promptly and in good faith to remedy his lack of workers’ compensation insurance by calling a broker quickly, and securing a valid policy on December 1, 2017. u i. Application of Law to Facts The Court finds that Paycheck did not satisfy the aletnents of the substantial compliance 10 defense. The acts of Paycheck prior to November 2017 are relevant to the issue of intent, absence 11 of mistake, state of mind, and knowledge. Simons, California Evidence Manual § 6:1 et. seq. (2021); 12 see Loranger, 184 Cal.App.4th at 855 (referring to the pattern and practice of the contractor in, 13 Wright). The evidence illustrates a history of noncompliance. by Paycheck. He repeatedly paid 14 employees during his exemption period prior to the Sarna project. For example, two days after 15 receiving an exemption in June 2017, he paid Orrego $4,800. Exs. 7, 9. In total, Paycheck paid 16 Orrego over $46,000 between the time his exemption went into effect, and the time that he obtained 17 workers’ compensation insurance. Ex. 7. Then, in the Sarna agreement, Paycheck falsely 18 represented that his company held a $2 million workers’ compensation policy. Ex. 1 The Court finds 19 that Paycheck was not duly licensed as a contractor in the state prior to the performance of the Sarna ' 20 project. 21 Second, Paycheck did not act in good faith to remedy his failure to comply with the licensure 22 requirement. At the time that he made the representation to Sama in mid-November, 2017 that he 23 had workers’ compensation insurance, Paycheck knew that he was not in compliance with the 24 insurance requirement. This is clear because he sought and obtained a policy after starting the 25 project. In remedying his initial failure to comply with the licensure requirements, however, 26 Paycheck severely underreported his payroll. This is apparént from his November 29, 2017 27 application, his February 2018 audit, and his February 28, 2018 application. In the year following 28 his December 2017 policy, in which he represented that he had a payroll of $30,000, Paycheck payed “] §2 STATEMENT OF DECISION over $470,000 to Orrego and Castro alone, an amount more than fifteen times greater than what he represented. Ex. 7. Paycheck exceeded the $30,000 payroll figure within two weeks of obtaining the policy. Jd. These misrepresentations went beyond incidental or “de minimis” discrepancies, and . instead represent attempts to sidestep the workers’ compensation insurance requirement. Moreover, in February 2018, Paycheck’s’ policy was canceled for failure to pay his premiums. Paycheck also argues that there is no evidence that he underreported the payroll, but documents, which were admitted into evidence, au the underreporting when compared to his payroll checks. Exs. 15, 18, 19 (insurance documents); see Ex. 5-8 (payments). By working on the Sarna project in mid-late November without workers’ compensation insurance . after promising otherwise, vastly 10 misrepresenting his payroll in subsequent policy applications, and failing to pay his premiums, ll Paycheck did not act in good faith to remedy his lack of workers’ compensation insurance. Thus, he 12 did not demonstrate substantial compliance with the licensure requirement. 13 Vi. CONCLUSION 14 The. Court finds that Paycheck was not duly licensed at all times during the Sarna project, 15 and did notmeet the substantial compliance requirements of Business and Professions Code section 16 7031(e). Accordingly, Paycheck’s complaint and all causes of action therein against Sama are barred 17 by Business and Professions Code section 703 1(a). y 18 In its Joint Request for C.R.C. 3.1590 Statement of Decision, the parties jointly asked 19. whether Sarna was ‘entitled to-all compensation that Sarna paid Paycheck pursuant to Business & 20 Professions Code section 7031(b), which provides that “Except as provided in subdivision (e), a 21 person who utilizes the services of an unlicensed contractor may bring an action in any court of 22 competent jurisdiction in this state to recover all compensation paid to the unlicensed contractor for 23 performance ‘of any act or contract.” For the first time, Paycheck now claims that the statute of 24 limitations bars this claim. Amendment to Plaintiff's Objections to Proposed Statement of Decision 25 at 2. This claim must fail. First, Paycheck failed to request that the Court address the issue in the 26 Statement of Decision, thus he is deemed to have waived it. City of Coachella v. Riverside County 27 Airport Land Use Com. (1989) 210 Cal.App.3d 1277, 1292. Second, Paycheck waived any statute 28 of limitations defense because he did not assert it in his answer. Minton v. Cavaney (1961) 56 Cal.2d -16- STATEMENT OF DECISION 576, 581, Third, even if the defense is considered on the merits, it fails. Based upon the stipulation of the Sarnas and Paycheck, supported by Sarna’s trial testimony (152:13-152;:25), the amount Sarna paid Paycheck is $228,330.63, which is the amount to be repaid by Paycheck to the Sarnas. There are still outstanding causes of action in this case. Therefore, it would be premature to enter judgment at this time. Accordingly, pursuant to. California Rule of Court 3.1590(f),(m), the Court extends the time for submission of a proposed judgment until after the other claims are resolved, IT IS SO ORDERED: Dated: June 30, 2021 é— 10 TAN baa INEM 11 f the Superio’ rt of California SatrMateo County 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -17- STATEMENT OF DECISION EXHIBIT 2 Een Amount Sequence Number: 9592347739 Account Capture Date: 12/12/2017 Bank Number: 12100035 Check Number: 1190