Manela v. Stone

Filed 7/1/21
CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION ONE

YOSEF Y. MANELA, B302660

Plaintiff and Respondent, (Los Angeles County
Super. Ct. Nos. 19STCV18640
v. c/w 19STCV24162)

JOHN D.S. STONE et al.,

Defendants and Appellants.

APPEAL from orders of the Superior Court of Los Angeles
County, Daniel S. Murphy, Judge. Reversed.
Selvin & Weiner and Beryl Weiner for Defendants and
Appellants.
Buchalter, Robert M. Dato; and Gabriel G. Green for
Plaintiff and Respondent.

____________________________________
 Defendants John D.S. Stone (Stone) and JDSS
Construction Company, Inc. (JDSS) (collectively, the Stone
parties) appeal from an order removing the Stone parties’
mechanic’s lien on a property owned by plaintiff Yosef Manela
(Manela) and his former wife Nomi Manela (the Manela
property). The Stone parties jointly filed the mechanic’s lien to
collect payment for work they performed on the Manela property
pursuant to a construction contract executed by the Manelas
and Stone (the Manela contract), the quality of which Manela
challenged in a separate lawsuit. After compelling the parties’
disputes to arbitration, the trial court granted Manela’s motion
to remove the mechanic’s lien based on the court’s conclusion that
Business and Professions Code section 7031, subdivision (a)1
likely required the Stone parties to forfeit compensation for any
work performed under the Manela contract.
Section 7031 generally prohibits a contractor from
collecting any compensation under a construction contract if the
contractor is not licensed at all times during performance of that
contract. (See § 7031, subd. (a).) After beginning work on the
Manela property, Stone formed a corporation, JDSS, of which
Stone is the sole shareholder, and assigned the Manela contract
to the new entity. The trial court concluded that, because Stone
assigned the contract to JDSS before Stone’s contracting license
had been transferred to JDSS, JDSS was unlicensed during a
portion of the time it was “performing work under the [c]ontract”
and could not recover compensation thereunder, including via the
mechanic’s lien.

1Unless otherwise specified, all statutory references are to
the Business and Professions Code.

2
 On appeal, the Stone parties argue that the evidence
does not support that JDSS performed work under the Manela
contract before it became licensed, and in particular that the
trial court improperly relied on an assignment agreement as
conclusive evidence of such unlicensed performance. We hold
that the evidence in the record compels the conclusion that
section 7031 does not apply in the instant case. Accordingly,
we reverse.

FACTS AND PROCEEDINGS
A. The Manela Contract
From 1982 through 2015, Stone held a California general
contractor’s license (license No. 425872) and did business under
that license as Stone Construction Company, a fictitious business
name for his sole proprietorship.
In early 2014, Stone and Manela began discussing a major
home remodeling project on the Manela property. On January 4,
2015, Stone—as a sole proprietor doing business as Stone
Construction Company—and the Manelas signed the Manela
contract regarding the project. The contract provided that “SCC
[Stone Construction Company] will perform the work specified
herein at the [Manela] property on behalf of the owner[s] [the
Manelas]” and included a price and estimated completion date
of December 2015. (Capitalization omitted.) It further provided
that “extra work and change orders become part of the contract
once the order is prepared in writing and signed by the parties
prior to the commencement of any work covered by the new
change order.” (Capitalization omitted.)

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 B. The Incorporation of Stone’s Business As JDSS
On February 11, 2015, after work on the project had begun,
Stone formed JDSS, a corporation doing business under the same
fictitious business name as Stone’s sole proprietorship, Stone
Construction Company. Stone was the sole shareholder of the
corporation. Stone applied to the Contractors State License
Board (CSLB) to reissue his existing contractor’s license to JDSS.
While waiting for the CSLB to reissue the license, Stone
executed a March 15, 2015 agreement between himself and JDSS
(the assignment agreement) that purports to formally assign to
JDSS “all of [Stone’s] rights and obligations under the [Manela
contract]” “effective . . . March 15, 2015.”2 The agreement was
signed by Stone in his personal capacity, as well as by Stone on
behalf of JDSS in his capacity as its president. It was not signed
by either of the Manelas.
The CSLB ultimately reissued Stone’s license (license
No. 425872) to JDSS on June 22, 2015. Stone is listed as the
“qualifying individual” on the reissued license. (See § 7068,
subd. (b)(3) [“a corporation, or any other combination or

2 Although the assignment agreement purportedly
“assigns” Stone’s “rights and obligations” under the Manela
contract, it is properly understood as an assignment of Stone’s
rights under the Manela contract to JDSS, which JDSS accepted,
and an attempted delegation of Stone’s duties under that
contract. (See 29 Williston on Contracts (4th ed. 2021) § 74:27
[“One can assign rights and delegate duties; however, one cannot
assign duties”]; Recorded Picture Company [Productions] Ltd. v.
Nelson Entertainment, Inc. (1997) 53 Cal.App.4th 350, 362 [the
“ ‘assignment of rights under an executory contract does not
[necessarily] cast upon the assignee the obligations imposed by
the contract upon the assignor’ ”].)

4
organization, . . . shall qualify by the appearance of a responsible
managing officer or responsible managing employee who is
qualified for the same license classification as the classification
being applied for”].)

C. Activity During the Period When JDSS Was Not
Yet Licensed
Manela does not dispute that Stone was the person who
performed all contractor work on the project during the period
between March 15, 2015 (when Stone purported to assign the
Manela contract to JDSS) and June 22, 2015 (when the CSLB
reissued Stone’s license to JDSS). Whether Stone was doing so in
his personal capacity or as an agent of JDSS was the key subject
of disagreement in the proceedings below.
During this approximately three-month period,
Stone continued to send invoices to the Manelas as a sole
proprietorship, doing business as Stone Construction Company.
The first invoice reflected in the record from JDSS is dated
August 10, 2015 (i.e., after JDSS was licensed); all subsequent
invoices reflected in the record for work under the Manela
contract are from JDSS as well.
The record also contains an unsigned change order dated
during the three-month period when JDSS was not yet licensed.
This document, dated June 10, 2015, is on JDSS letterhead and
lists license number 425872 as the applicable contractor’s license
number. It provides that “[t]he contractor agrees to perform
and the owner agrees to pay for the following changes to this
contract,” then describes certain work and its pricing. There
are spaces on the form for both the “contractor” and “owner” to
sign and date under the word “approved,” but these spaces are
blank. (Capitalization omitted.) The document appears to bear

5
a “paid” stamp, which includes a text box that is likewise blank,
as well as a notation that the work was “invoiced on ynm-07.”
(Capitalization omitted.) The record does not indicate if or when
this work was performed and/or approved, or when the work
described in the change order was invoiced or paid for.

D. The Parties’ Dispute and Lawsuit
Throughout the course of the project, Manela requested
numerous change orders that expanded the scope of the project,
increased the cost, and delayed the estimated completion date,
although the extent to which they did so is a subject of debate
between the parties. In late 2018, the project still was not
completed, and the Manelas stopped paying JDSS’s invoices.
Manela filed this action against the Stone parties,3 whom the
complaint alleged were alter egos of each other, alleging they had
performed defective work and made material misrepresentations
in order to induce the Manelas to sign the Manela contract.
The Stone parties then jointly recorded a mechanic’s lien on
the Manela property for the amount of allegedly unpaid invoices
and filed a related action against the Manelas.4 Their verified
complaint included claims for breach of contract and foreclosure
on the mechanic’s lien. Paragraph 18 of the complaint
alleged that “[f]rom and after March 15, 2015, plaintiff JDSS
Construction Company, Inc., dba Stone Construction Company
continued work to provide the services required under the

3 Although the Manelas both signed the Manela contract,
Manela is the only plaintiff in the lead action against the Stone
parties, and Nomi Manela is not a party to either that action or
this appeal.
4 The two actions were assigned to the same trial judge.

6
contract.” (Capitalization omitted.) The assignment agreement
was attached as an exhibit to the verified complaint as well.
The Stone parties also filed a petition to compel arbitration
of Manela’s claims, pursuant to an arbitration clause in the
Manela contract.

E. Licensure Issue Raised in Manela’s Amended
Complaint and Motion to Remove Mechanic’s
Lien
Manela’s initial complaint did not include any allegations
about or causes of action based on lack of licensure. Based on
the Stone parties’ verified allegation in paragraph 18 of their
complaint, however, Manela amended his complaint to add
allegations that JDSS “and possibly Stone as well” had performed
work on the project without a contractor’s license, in violation of
section 7031. Section 7031, subdivision (a) prohibits, inter alia,
any “person engaged in the business or acting in the capacity
of a contractor” from “recover[ing] . . . compensation for the
performance of any act or contract where a license is required
by this chapter without alleging that they were a duly licensed
contractor at all times during the performance of that act or
contract.” Subdivision (b) of the section further provides
for disgorgement of compensation already paid under such
circumstances. (§ 7031, subd. (b) [“a person who utilizes the
services of an unlicensed contractor may bring an action . . .
to recover all compensation paid to the unlicensed contractor
for performance of any act or contract”].) Manela’s amended
complaint asserted new causes of action on this basis and sought,
in addition to damages based on Manela’s preexisting breach of
contract and negligence claims, return of all money the Manelas

7
had paid for work under the Manela contract, totaling over
$2 million.
Manela also filed a motion to remove the Stone parties’
jointly filed mechanic’s lien on several bases, including that the
lien was invalid under section 7031, subdivision (a), because
neither JDSS nor Stone was continuously licensed at all times
while performing work on the project.

F. The Parties’ Submissions Regarding the Motion
to Remove Mechanic’s Lien
The Stone parties opposed the motion to remove the
mechanic’s lien, claiming that there had been no gap in the
requisite licensure. Stone’s declaration submitted in support of
the Stone parties’ opposition contains several statements about
when Stone believed himself to be providing services as an agent
of JDSS. The declaration first provides that “[p]rior to June 22,
2015 [the date the license was transferred to JDSS], Stone
conducted his general contractor license business under the
dba Stone Construction Company.” Later, in paragraph 13, it
provides that “[f]rom and after February 11, 2015, all of Stone’s
general contracting business was conducted under the aegis of
JDSS.” (Italics added.) Finally, the declaration provides that
Manela “knew from and after the date of the [fifth] change order
dated June 10, 2015 that JDSS was providing all of the services
(labor and materials) under the contract” and that this was
“reflected on the change orders, the JDSS invoices, [and]
payments by [Manela] to JDSS.” (Capitalization omitted.)
In response, Manela argued that the assignment of the
construction contract prior to JDSS becoming licensed created
a gap in the requisite licensure even if Stone was always the
person performing the contracting services. Somewhat in tension

8
with this, however, in opposing the Stone parties’ concurrently
filed motion to compel arbitration, Manela also argued that
“Manela never consented to th[e] assignment, nor did he ratify
it.”5
The day before the hearing on the mechanic’s lien motion,
the Stone parties’ counsel filed an errata to the Stone declaration
previously filed in opposition to that motion. The errata
purported to alert the court to a “typographical error” and
omission—namely that the wrong date for when “all of Stone’s
general contracting business was conducted under the aegis of
JDSS” was inadvertently included in the Stone declaration. In
a supplemental declaration from Stone in support of the errata,
Stone explained that he had actually conducted business as JDSS
“ ‘[f]rom and after June 22, 2015,’ ” rather than from and after
February 11, 2015, as his earlier declaration had indicated.

G. Trial Court’s Decisions Regarding the
Mechanic’s Lien Motion and Related Motion
for Reconsideration
The court addressed Manela’s motion to remove the
mechanic’s lien and the Stone parties’ motion to compel
arbitration in the same tentative ruling, which the court
ultimately adopted in full. In that ruling, the trial court first
granted the arbitration motion. Manela had argued in opposition
to the motion that he could not be compelled to arbitrate with
JDSS because JDSS had not signed the arbitration agreement.

5 Likewise, in his opposition to the Stone parties’ petition
to compel arbitration, Manela argued he could not be compelled
to arbitrate his claims against JDSS because JDSS was not a
party to the home improvement contract.

9
The court rejected this argument based on the court’s conclusion
that the allegations in Manela’s complaint established “sufficient
identity of [the] parties between Stone . . . and JDSS” to enforce
the arbitration agreement against Manela.
In addressing the mechanic’s lien motion, the court
first rejected the Stone parties’ argument that the court lacked
jurisdiction to hear the motion because the matter was being
compelled to arbitration. The court emphasized that it had
limited jurisdiction to address the mechanic’s lien issue, and
would not be addressing the merits of the parties’ dispute.
The court granted the motion to remove the mechanic’s lien
on the basis that JDSS had performed work under the contract
without a license.6 The court explained that this conclusion
flowed solely from the assignment agreement; because “JDSS
assumed Stone’s rights and obligations under the [Manela]
[c]ontract” on March 15, 2015, “from March 15, 2015 to June 22,
2015, JDSS performed contractor services for which it was not
licensed.” The court further concluded that the assignment
distinguished the facts before it from a situation in which there
was a mere change in a contractor’s business form. (Cf. E. J.
Franks Construction, Inc. v. Sahota (2014) 226 Cal.App.4th 1123,
1129-1130 (Franks).)
The court declined to characterize anything in its order as
a finding of fact, emphasizing that it had “merely evaluat[ed] the

6The court did not find that Stone had performed under
the Manela contract without a license, nor did the ruling
otherwise address the argument made in Manela’s motion that
Stone had done so in violation of section 7031. Manela presented
two other bases on which he argued the court should remove the
mechanic’s lien, but the court rejected these.

10
probable validity of [d]efendants’ mechanic[’s] lien, not the merits
of this claim or claims that are compelled in arbitration.”7
The Stone parties filed an ex parte application and/or
motion seeking reconsideration of the trial court’s order removing
the mechanic’s lien, relief under Code of Civil Procedure
section 473, and/or leave to amend their complaint to correct
(primarily by deleting the complaint’s reference to the March 15,
2015 start date for when JDSS began providing services under
the contract). The Stone parties also requested an evidentiary
hearing on the issue of JDSS’s compliance with section 7031. In
connection with these requests, Stone filed another declaration,
in which he stated that the assignment “was not implemented
until such time as my contractor[’]s license number 425872 was
reissued on June 22, 2015 in the name of JDSS with myself
as the qualifying individual under the same license” and that
he “personally performed all contractor work on the Manela
parties[’] home improvement project from January 4, 2015 until
June 22, 2015.” (Capitalization omitted.)
At the ex parte hearing, the court explained that even
assuming the Stone parties’ most recent version of events were
true, “it wouldn’t . . . change[ ] my tentative [ruling] anyway . . .
because there’s no dispute there was a complete assignment in
March to that corporation [JDSS], which was not licensed.” The

7 We note, however, that Manela later filed a revised
statement of claims in the arbitration proceeding, relying in part
on the trial court’s order regarding the mechanic’s lien motion.
Among other things, Manela alleged that the trial court’s
“finding” on JDSS’s performance of services without a license
meant Manela may recoup the over $2 million in payments he
made to the Stone parties under the Manela contract.

11
court overruled Manela’s evidentiary objections to the most
recent Stone declaration, and noted—but did not make any
findings resolving—the conflicts between the various Stone
declarations.8
The court denied the Stone parties’ request for ex parte
relief, except for granting them leave to amend their complaint.

DISCUSSION
The Stone parties filed a petition for writ of mandate
in this court (case No. B302131) challenging the court’s order
removing the mechanic’s lien, as well as a notice of appeal (case
No. B302660) challenging both that order and the order denying
the Stone parties’ requested ex parte relief. This court initially
issued an order to show cause in the writ proceeding, then
discharged the order to show cause and informed the parties
that the writ petition would be considered with this appeal.
We conclude—and Manela does not contest—that the order
removing the mechanic’s lien is appealable. (See Howard S.
Wright Construction Co. v. Superior Court (2003) 106 Cal.App.4th
314, 318 [“the grant of a motion to remove a mechanic's lien is
essentially a judgment on the underlying foreclosure action that
no lien exists—a judgment that, upon recordation, removes the
lien from the public records . . . [a]nd . . . is a final, appealable
judgment for which writ relief would ordinarily be denied,”

8Specifically, the court commented, “The problem
I’m having is I have different declarations under penalty of
perjury. . . . Am I to basically accept one version and ignore the
other? Obviously if this was in trial, you would be able to—he
would be able to point out inconsistencies for the jury to decide
which is correct and which isn’t correct.”

12
fn. omitted].) We therefore consider the merits of the Stone
parties’ appeal from the order removing their mechanic’s lien.9
A motion to remove a mechanic’s lien should be granted
only when the lienholders (here, the Stone parties) fail to
make a threshold showing of the “probable validity of the lien.”
(Lambert v. Superior Court (1991) 228 Cal.App.3d 383, 387.)
Thus, by removing the mechanic’s lien in this case based on the
applicability of section 7031, the trial court concluded the Stone
parties had failed to show it was “probable” that section 7031
did not apply and/or did not require forfeiture of compensation
under the contract. On appeal, the Stone parties argue the
evidence does not support the court’s conclusion in this regard.
For reasons we discuss below, we agree.

A. Applicable Law Regarding Section 7031
Forfeiture
The Contractors State License Law (CSLL) (§ 7000 et seq.)
governs construction business in California in a manner intended
to “ ‘ ‘‘protect the public from incompetent or dishonest providers
of building and construction services. [Citation.]’’ [Citation.]’ ”
(Pacific Caisson & Shoring, Inc. v. Bernards Bros. Inc. (2011)
198 Cal.App.4th 681, 687.) The CSLL requires all contractors
“be licensed unless exempt.” (White v. Cridlebaugh (2009)
178 Cal.App.4th 506, 517.) Section 7031, subdivision (a) sets
forth the general rule that “no person engaged in the business

9Our disposition of the Stone parties’ appeal from this
order moots their appeal from the subsequent order seeking
reconsideration and related ex parte relief. It likewise moots
their writ petition (case No. B302131), which seeks relief also
sought in the appeal. We deny the writ petition on that basis
by separate order, concurrently filed with this opinion.

13
or acting in the capacity of a contractor, may bring or maintain
any action . . . for the collection of compensation for the
performance of any act or contract where a license is required
by this chapter without alleging that they were a duly licensed
contractor at all times during the performance of that act or
contract.” In M.W. Erectors, Inc. v. Niederhauser Ornamental
& Metal Works Co., Inc. (2005) 36 Cal.4th 412 (M.W. Erectors),
the California Supreme Court made clear the all-or-nothing
nature of section 7031’s forfeiture provisions, explaining that
a contractor “is ineligible to recover any compensation under
the terms of [section 7031], if, at any time during performance
of an agreement for contractor services, he or she was not duly
licensed.”10 (M.W. Erectors, supra, at p. 425, italics omitted;
id. at pp. 419 & 425−426.)
Importantly for purposes of this appeal, the time period
during which section 7031 requires a party to be licensed in order
to avoid forfeiture of compensation under a contract is not the

10 There is a singular, narrow “substantial compliance”
exception available under very specific circumstances set forth
in section 7031, subdivision (e). (§ 7031, subd. (e); see M.W.
Erectors, supra, 36 Cal.4th at pp. 418−419 & 433−434.) The
Stone parties do not argue that this exception applies. (See
§ 7031, subd. (e) [“the court may determine that there has been
substantial compliance with licensure requirements under this
section if it is shown at an evidentiary hearing that the person
who engaged in the business or acted in the capacity of a
contractor (1) had been duly licensed as a contractor in this
state prior to the performance of the act or contract, (2) acted
reasonably and in good faith to maintain proper licensure, and
(3) acted promptly and in good faith to remedy the failure to
comply with the licensure requirements upon learning of the
failure”].)

14
period during which the party is “engag[ed] in the business or
act[ing] in the capacity of a contractor,” but rather the period
when the contractor is performing under the contract.11 (See
M.W. Erectors, supra, 36 Cal.4th at p. 435, italics omitted;
ibid. [“the due licensure of which section 7031[, subdivision] (a)
speaks is due licensure while the contract itself is being
performed”].) For this reason, section 7031 does not require
forfeiture based on the contractor executing a construction
contract while unlicensed.12 (M.W. Erectors, supra, 36 Cal.4th
at pp. 435−437 & 440−441.) “[I]f fully licensed at all times

11 When no construction contract is in place, the time frame
during which section 7031 requires a party be licensed in order
to avoid forfeiture also is not determined by when the party is
engaged in the business or acting in the capacity of a contractor,
but rather by when the party is performing the acts for which the
CSLL requires a license and for which compensation is sought.
(See § 7031, subd. (a).)
12 Our Supreme Court more fully explains this point
as follows: “At the outset, we take note that allowing suit and
recovery under such circumstances [when the contractor is not
licensed at the time it executes the contract] violates no express
term of section 7031[, subdivision] (a). That statute prohibits a
contractor from suing ‘for the collection of compensation for the
performance of any act or contract where a license is required . . .
without alleging that he or she was a duly licensed contractor
at all times during the performance of that act or contract.’
[Citation.] The ‘act’ of executing an agreement is not one for
which a contractor seeks compensation; rather, he or she pursues
payment for carrying out the contract in a satisfactory manner.
[Citation.] Hence, we conclude, the due licensure of which
section 7031[, subdivision] (a) speaks is due licensure while
the contract itself is being performed.” (M.W. Erectors, supra,
36 Cal.4th at p. 435, italics omitted.)

15
during contractual performance, a contractor is not barred
from recovering compensation for the work solely because he
or she was unlicensed when the contract was executed.” (Id.
at p. 419, italics added & omitted.) M.W. Erectors explains
that this conclusion follows in part from the plain language of
section 7031, and in part from the CSLL more broadly treating
unlicensed acts “in the capacity of a contractor” differently than
unlicensed performance of a construction contract. (See M.W.
Erectors, supra, 36 Cal.4th at p. 437.) Namely, the CSLL
penalizes the broader general category of unlicensed acts in the
capacity of a contractor in section 7028, not section 7031, and
does so with civil and criminal penalties other than forfeiture.
(Id. at pp. 440−441; see § 7028, subd. (a) [it is a misdemeanor
“for a person to engage in the business of, or act in the capacity
of, a contractor within this state” without having a license].)
For the purposes of determining when a license is required
to avoid section 7031 forfeiture, “performance of . . . [the]
contract” refers to when the contractor is “carrying out” the
contract, and/or engaging in work for which the contractor will
seek compensation under the contract. (M.W. Erectors, supra,
36 Cal.4th at p. 435, italics omitted.) This does not mean that
the contractor is personally performing construction work.
Work by someone other than the contractor will often reflect a
contractor “carrying out” the contract and/or work for which the
contractor expects compensation under the contract, if the person
performing the work is doing so at the request of or otherwise
on behalf of the contractor. (See Judicial Council of California v.
Jacobs Facilities, Inc. (2015) 239 Cal.App.4th 882, 897 (Jacobs
Facilities) [contractor performed under contract when, as
contemplated by the contract, the contractor “deliver[ed] services”

16
performed by others and accepted compensation for them]; WSS
Industrial Construction, Inc. v. Great West Contractors, Inc.
(2008) 162 Cal.App.4th 581, 591−594 [subcontractor doing work
under a construction contract at contractor’s request while the
contractor was unlicensed triggered section 7031 forfeiture of
contractor’s compensation under the contract].)
The Stone parties primarily rely on Franks, supra,
226 Cal.App.4th 1123, a decision that draws heavily on the
reasoning of M.W. Erectors and is factually similar to the instant
appeal. In Franks, an individual contractor entered into a home
construction contract with the defendant homeowners. During
performance of the contract, he incorporated the plaintiff
corporation, of which he was the sole shareholder. The
contractor’s license that had been issued initially to him in
his personal capacity was reissued to his corporation, at which
point the corporation took over work under the contract. (Id. at
p. 1126.) The defendants argued that, because the corporation
had not been licensed at all times during the performance of
the contract, the plaintiff corporation had violated section 7031
and could not collect payment for any work under the contract.
(Franks, supra, p. 1126.) The Court of Appeal disagreed, holding
that these facts “involve[d] a licensed contractor and a change
in business entity status. Proper licensure was in place at all
times” (id. at p. 1129), in that a licensed individual was the
contractor on the project until he stopped doing business as a
sole proprietorship, incorporated his business, and transferred
his license to the resulting new corporate entity, at which point
that licensed corporate entity began acting as the contractor
on the project. (See id. at pp. 1129−1130.) Absent a gap in
the contractor’s licensure during contractual performance,

17
“section 7031 [did] not apply.” (Franks, supra, at p. 1128.)
Franks distinguished cases requiring section 7031 forfeiture as
“involv[ing] a period wherein the contractor was unlicensed or
where a license previously issued lapsed during the construction
project.” (Franks, supra, p. 1129.)
With this precedent regarding section 7031 in mind, we
turn to the Stone parties’ argument that the trial court erred in
its reliance on section 7031 to remove the mechanic’s lien in this
case.

B. Section 7031 Does Not Apply
The Stone parties argue that the evidence does not support
the trial court’s conclusion that they failed to show section 7031
probably does not require forfeiture. Specifically, the Stone
parties argue neither the assignment agreement, nor the record
as a whole, provides substantial evidence that JDSS performed
under the contract before it was licensed.
Although we ordinarily review evidentiary challenges
for substantial evidence, that standard “ ‘is typically implicated
when a defendant contends that the plaintiff succeeded at
trial in spite of insufficient evidence.’ ” (Sonic Manufacturing
Technologies, Inc. v. AAE Systems, Inc. (2011) 196 Cal.App.4th
456, 465; In re I.W. (2009) 180 Cal.App.4th 1517, 1528,
disapproved of on other grounds by Conservatorship of O.B.
(2020) 9 Cal.5th 989.) “ ‘In the case where the trier of fact has
expressly or implicitly concluded that the party with the burden
of proof did not carry the burden’ ”—here, the court’s implicit
finding that Stone parties failed to prove the probable validity of
the lien—and that party appeals, “ ‘the question for a reviewing
court becomes whether the evidence compels a finding in favor
of the appellant as a matter of law.’ ” (Dreyer’s Grand Ice Cream,

18
Inc. v. County of Kern (2013) 218 Cal.App.4th 828, 838.) We thus
consider whether the evidence compels the conclusion that JDSS
did not perform under the contract while unlicensed.
The parties identify the following evidence in this regard:
the assignment agreement; the June 10, 2015 change order; and
the conflicting statements by Stone regarding his work under the
Manela contract. We address each in turn below.

1. The assignment agreement
The trial court viewed the assignment agreement as
conclusive evidence that JDSS began performing under the
contract as of March 15, 2015 (the effective date listed in the
assignment). The Stone parties argue the assignment agreement
cannot serve as such evidence. We agree.
Under the assignment agreement, Stone assigned his
rights and purported to delegate the performance of his duties
under the Manela contract to JDSS, and JDSS accepted the
assignment of rights and assumed Stone’s duties. (See p. 4, fn. 2,
ante.) A third party’s agreement to assume a contractor’s duties
under a construction contract without a license is akin to the
execution of a construction contract without a license, something
the California Supreme Court has explained does not trigger
section 7031 forfeiture. (M.W. Erectors, supra, 36 Cal.4th at
pp. 419, 435−437 & 440−441.) Such an assumption is neither
an act for which the assignee may seek compensation under the
contract, nor an act that can be fairly characterized as “carrying
out the contract.” (Id. at p. 435, italics omitted.) It thus cannot
constitute “ ‘performance of that . . . contract.’ ” (Ibid., italics
omitted.) Moreover, as in the case of unlicensed contractual
execution discussed in M.W. Erectors, “[n]o compelling reason
exists to conclude that the public protective purposes of the CSLL

19
can only be served by deeming [a construction contract assigned
before the assignee is licensed] illegal, void, and unenforceable
on that basis alone.” (Id. at p. 441, italics added.)
Thus, for the purposes of applying section 7031, the
assignment agreement cannot establish that JDSS began
performing under the contract before it was licensed.

2. The June 10, 2015 change order
Manela argues that the June 10, 2015 change order on
JDSS letterhead reflects JDSS performing under the contract
as of that date. But the change order describes work to be
performed in the future; it does not indicate whether or when
the work was performed. Thus, a reasonable trier of fact could
not infer from this document that any work had been performed
at the request of or on behalf of JDSS before June 22, 2015.
Nor does JDSS’s mere issuance of a change order meet
the definition of performance of the contract set forth in
M.W. Erectors, because it is neither an act “for which [JDSS]
seeks compensation” nor an act “carrying out the contract.”
(M.W. Erectors, supra, 36 Cal.4th at p. 435, italics omitted.)
Rather, the Manela contract provides that work may be added
to the contract’s scope through a written change order signed
by both parties, meaning that executing a change order is an
act amending the original contract and, like entering into the
contract, does not constitute performance thereunder. Although
issuing a change order is certainly an “ ‘act[ ] in the capacity of
a contractor’ ” (id. at p. 437), M.W. Erectors distinguishes such
acts from the narrower category of performance under a specific
contract, and makes clear that the former does not trigger

20
section 7031 forfeiture.13 (See M.W. Erectors, supra, at
pp. 435-437 & 440−441.)

3. Stone’s statements regarding his work
under the Manela contract
Manela does not contend, and the record contains no
evidence, that any person other than Stone or subcontractors
hired by him performed any work under the Manela contract
before June 22, 2015. The Stone parties’ verified complaint
and Stone’s multiple declarations conflict regarding whether,
before that date, Stone performed that work and/or engaged
others to perform that work in his personal capacity or on behalf
of JDSS. Regardless, however, of what Stone declared or wrote in
his complaint, and notwithstanding the assignment agreement,
Stone remained personally liable for his promised performance
under the Manela contract in the absence of the Manelas’ consent
to the purported delegation. (See Civ. Code, § 1457; Jacobs
Facilities, supra, 239 Cal.App.4th at pp. 901−902 [“[w]ithout
the consent of the obligee, the delegation of a duty by an obligor
under a contract does not extinguish the obligor’s duty”]; see
also Wiseman v. Sklar (1930) 104 Cal.App. 369, 374-375 [“ ‘[t]he
obligations of an assignor of a contract continue to rest upon
him’ ” “irrespective of the legality or lack of legality of the
assignment, [the assignor] [is] at all times responsible to [the

13 To the extent Jacobs Facilities stands for the proposition
that a contractor executing contractual amendments or invoices
under a construction contract necessarily constitutes the
performance of that contract for the purposes of section 7031
(see, e.g., Jacobs, supra, 239 Cal.App.4th at pp. 897 & 905), we
view it as inconsistent with M.W. Erectors, and decline to follow
it.

21
other parties] under the contract”].) Yet, Manela does not
contend that the Manelas consented to the delegation before
June 22, 2015, nor does the record contain evidence supporting
any such approval.
The assignment agreement purports to assign Stone’s
rights and delegate his obligations under the Manela contract
to JDSS, effective March 15, 2015. Generally speaking, “[t]he
statutes in this state clearly manifest a policy in favor of the
free transferability of all types of property, including rights
under contracts” (Farmland Irrigation Co. v. Dopplmaier (1957)
48 Cal.2d 208, 222), but contractual “duties imposed upon one
party may be of such a personal nature that their performance
by someone else would in effect deprive the other party of that
for which he bargained. The duties in such a situation cannot
be delegated.” (Ibid.; see Superbrace, Inc. v. Tidwell (2004)
124 Cal.App.4th 388, 402 (Superbrace) [same].) For example,
duties “are not delegable in either of the following situations:
(1) where in the nature or circumstances of the case, the skill,
credit or other personal quality of the party was a distinctive
characteristic of the thing stipulated for, namely, the personal
nature of the contract itself, or (2) the personal quality of the
party was a material inducement to the other party entering
into the contract.” (Edgar Rice Burroughs, Inc. v. Commodore
Productions & Artists, Inc. (1959) 167 Cal.App.2d 463, 469.)
Here, the contractor services Stone agreed to provide to the
Manelas in the Manela contract are personal services to be
rendered by Stone. According to the allegations in Manela’s
complaint (which Manela reiterated in his brief to this court),
“Manela felt comfortable enough to agree to the terms and
execute a fixed price construction contract with Stone” and

22
“agreed to hire Stone notwithstanding Stone’s substantially
higher bid [for the project] because Stone represented that he
was the most qualified general contractor to handle the project,
he would provide the highest quality of service and oversight of
the project, [and] he would complete the project pursuant to a
clear, fixed price construction contract” within a certain amount
of time. Thus, that Stone would be the contractor on the project
was a “material inducement to the [Manelas] entering into
the contract.” (See id. at p. 469.) Under such circumstances,
one’s obligation to perform personal services under a contract
cannot be transferred “ ‘without the consent of the person entitled
to such performance.’ ” (Superbrace, supra, 124 Cal.App.4th at
p. 404.)
Manela does not argue that he consented to the assignment
agreement before June 22, 2015,14 nor does the record contain
any evidence that this occurred. The June 10, 2015 change order
on JDSS letterhead does not reflect the Manelas’ acquiescence
to JDSS stepping in for Stone before June 22, 2015, as it is not
signed as approved by either of the Manelas, nor does it indicate
if or when the Manelas paid for such proposed work15 or when

14 To the contrary, in his motion to remove the mechanic’s
lien, Manela claimed he “did not consent to any assignment
of the [Manela] contract from Stone to JDSS” at any point, a
claim he then reiterated in his reply supporting the motion.
(Capitalization omitted.)
15The document appears to bear a “paid” stamp with an
empty box below it. (Capitalization omitted.) Even if this stamp
is understood as indicating payment despite the lack of any
signature, initials, or date in that box, it still does not indicate
when such payment occurred. To the contrary, other notations on

23
the work was done. Rather, the earliest evidence in the record
that might constitute the Manelas’ acquiescence or consent to
the assignment agreement was their payment of JDSS invoices
for work performed under the Manela contract beginning in
August 2015. Absent any evidence of the Manelas’ consent to the
assignment agreement before June 22, 2015, Stone’s obligations
under the Manela contract still existed before June 22, 2015,
notwithstanding that the assignment agreement professes to be
effective as of March 15, 2015.16 As a result, regardless of how
Stone characterizes the work he performed before June 22, 2015,
he could not have been performing that work at the instruction
of or on behalf of JDSS, because he was already contractually
obligated to perform it in his personal capacity during that time
period. Put differently, until the Manelas consented to the
assignment agreement, “[t]he corporation [JDSS] was not the
contracting party,” and thus “did not act ‘as a contractor without
a license.’ ” (Franks, supra, 226 Cal.App.4th at p. 1130.)
The record thus compels the conclusion that Stone was not
performing under the contract on behalf of JDSS prior to JDSS
becoming duly licensed, that JDSS therefore was not performing

the document indicate the order was “invoiced” on an unspecified
date.
16 We need not and do not reach any conclusions as to if
or when the Manelas consented to the assignment, except to
note that there is no evidence in the record from which a
reasonable trier of fact could conclude that they consented to
it before June 22, 2015.

24
under the contract before it was licensed, and that section 7031
therefore does not apply.17

4. Franks
Our conclusion in this regard is consistent with the policy
rationale set forth in Franks, which we find persuasive. Here,
as in Franks, the same contractor’s license was in place at all
times during the performance of the contract, held at first by an
individual, then by that individual’s corporation. (See Franks,
supra, 226 Cal.App.4th at pp. 1128−1129; see also Jacobs
Facilities, supra, 239 Cal.App.4th at p. 899 [distinguishing
Franks because “[t]he continuity of license and business entity
that was central to the rationale of Franks was not present”].)
Franks concluded that, under these circumstances, allowing a

17 Manela does not argue that, if we conclude the trial court
erred in determining JDSS performed under the Manela contract
without a license, we should remand for the trial court to make
factual findings regarding whether Stone (as opposed to JDSS)
performed under the contract after his license was reissued to
JDSS on June 22, 2015, and whether the lien (held by both Stone
and JDSS) should be removed on this alternative basis. By
failing to raise this argument on appeal, Manela has forfeited it,
and we need not address it further. (See Tiernan v. Trustees of
Cal. State University & Colleges (1982) 33 Cal.3d 211, 216, fn. 4
[argument not raised on appeal is forfeited]; Boucher v. Alliance
Title Co., Inc. (2005) 127 Cal.App.4th 262, 267 [same].)
Similarly, we need not address arguments the trial
court rejected below as bases for removing the mechanic’s lien
(timeliness and a lien held by multiple parties), because Manela
does not argue on appeal that the court erred in rejecting these
arguments or that they provide alternative bases for affirming
the court’s order.

25
change in business form to create a gap in licensing “would lead
to absurd results” and would “effectively preclude licensed sole
proprietor contractors from lawfully incorporating and obtaining
a reissue of a general contracting license to the new business
entity at any time during the construction period.” (Franks,
supra, at p. 1129.)
Manela argues the trial court correctly concluded that the
instant case is distinguishable from Franks because it involves
the additional element of an assignment, rather than just
a change in business entity. But given that the assignment
agreement here could not unilaterally relieve Stone of his duties
to Manela under the original agreement (absent consent by
the Manelas), this is a distinction without a difference. Nor does
the additional element of the assignment agreement render any
less applicable Franks’ conclusion that forfeiture under such
circumstances would not serve “[t]he purpose of section 7031[,]
[which] is to deter unlicensed contractors from recovering
compensation for their work.” (Franks, supra, 226 Cal.App.4th at
p. 1129, italics omitted.) Just as the law “is not intended to deter
licensed contractors from changing a business entity’s status, and
obtaining a reissuance of the license to the new entity[,] during
a contract period” (ibid.), it is not intended to deter delegation
of contractual obligations based on such a “change in business
entity status” and concomitant reissuance of a license to that
new entity. (Ibid.)
Importantly, Franks did not treat the individual and the
corporation as interchangeable for the purposes of section 7031.
To the contrary, it recognized, as it must, that “a distinction
between a corporation and an individual [is] significant for
purposes of the CSLL” (Franks, supra, 226 Cal.App.4th at

26
pp. 1129−1130), a concept that played a prominent role in
Opp v. St. Paul Fire & Marine Ins. Co. (2007) 154 Cal.App.4th
71, 72–73 (Opp). The Court of Appeal in Opp required a
corporation to forfeit all payment for work under a construction
contract the corporation had signed because the corporation was
unlicensed during the performance of the contract, even though
the corporation’s president had a license during that time. (Id.
at pp. 74−76.) In executing the contract, the corporation had
represented that it held the license actually held by its president.
(Id. at pp. 72−73.) The Court of Appeal in Franks distinguished
Opp in part by noting that “[u]nlike Opp, Franks did not
misrepresent his contractor’s license by claiming it belonged to a
corporate entity. In fact, the corporate entity did not exist when
the contract . . . was executed.” (Franks, supra, at p. 1130.)
Opp is distinguishable from this case on this same basis. Franks
further distinguished Opp by noting that “recogniz[ing] the
individual as a contracting party in th[e] circumstances [present
in Opp] would, among other things, encourage fraud through
the misuse of another person’s contractor’s license and allow an
individual to enjoy the benefits of incorporation while avoiding
the burdens by effectively repudiating the existence of the
corporation when it was convenient to do so.” (Id. at p. 1130.)
This was not the case in Franks, nor is it the case here.

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 DISPOSITION
The order of the trial court removing the mechanic’s lien
is reversed. Upon remand, the trial court is instructed to enter
a new order confirming the validity of the mechanic’s lien
notwithstanding Manela’s motion to remove it.
The Stone parties are awarded their costs on appeal.
CERTIFIED FOR PUBLICATION.

ROTHSCHILD, P. J.
We concur:

CHANEY, J.

BENDIX, J.

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