Reule Sun Corp. v. Valles

IN THE SUPREME COURT OF THE STATE OF NEW MEXICO

Opinion Number: 2010-NMSC-004

Filing Date: November 23, 2009

Docket No. 31,192

REULE SUN CORPORATION,

Plaintiff-Respondent,

v.

JOE L. VALLES and JOANNE S. VALLES,
husband and wife,

Defendants-Petitioners.

ORIGINAL PROCEEDING ON CERTIORARI
Richard J. Knowles, District Judge

Cadigan & Park Law Firm, P.C.
Michael J. Cadigan
Lawrence M. Marcus
Albuquerque, NM

for Petitioners

Robert D. Gorman, P.A.
Robert D. Gorman
Albuquerque, NM

Cheryl Thompson
Albuquerque, NM

for Respondent

Julie Ann Meade
Santa Fe, NM
for Amicus Curiae New Mexico Regulation
& Licensing Department

OPINION

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SERNA, Justice.

{1} Joe and Joanne Valles (Valleses) entered into a contract with a licensed contractor, Reule
Sun Corporation (Reule) to apply stucco on their home. Reule hired an unlicensed subcontractor,
Perez Plastering (Perez), to complete the project. Valleses were dissatisfied with both the initial
stuccoing and re-stuccoing efforts and did not pay Reule. Reule filed a complaint alleging breach
of contract and filed a lien against Valleses’ property. The district court found in favor of Reule,
foreclosed the lien on Valleses’ property, and awarded damages to Reule. Valleses appealed and
the Court of Appeals upheld the district court’s decision. Reule Sun Corp. v. Valles, 2008-NMCA-
115, ¶ ¶ 1, 31, 144 N.M. 736, 191 P.3d 1197. We initially denied Valleses’ petition for writ of
certiorari, but after motions for reconsideration and to file an amicus brief were granted, we granted
the petition. We reverse.

I. BACKGROUND AND PROCEEDINGS BELOW

{2} Valleses entered into a contract with Reule for the application of stucco to their home for the
price of $11,350.51. Reule hired Claudio Perez, an unlicensed contractor doing business as Perez
Plastering, to complete the project. Reule did not pay Perez a salary, but instead paid him on a
contract-to-contract basis. Perez had his own state tax identification number and paid his own taxes.
Reule did not consider Perez an employee for tax purposes.

{3} Valleses were dissatisfied with the stucco job and Reule agreed to apply another layer of
stucco for an additional charge of $888.83, bringing the contract price to $12,239.34. After the
second application was completed, Valleses were still dissatisfied with the results and they indicated
that they did not want Reule to enter their property to remedy any mistakes or to finish the clean-up
procedures. Valleses never paid Reule the balance due on the contract after an initial down payment
of $1,000. Reule filed a claim of lien against Valleses’ property, followed by a complaint for breach
of contract and to foreclose claim of lien. Valleses answered the complaint and asserted various
counterclaims.

{4} Following a bench trial, the district court found that Perez performed the contract “under the
complete direction and control of [Reule]” and that the “subject of [the] lawsuit [did] not involve
a claim for compensation by an unlicensed contractor in violation of NMSA 1978, § 60-13-30.” The
court also concluded that Reule had substantially performed its obligation under the contract and
concluded that the protective purposes of the Construction Industries Licensing Act (CILA), NMSA
1978, §§ 60-13-1 to -59 (1967, as amended prior to 2003) were met. The district court found in
favor of Reule, foreclosed the lien on Valleses’ property, and awarded Reule damages, including
prejudgment interest, attorney fees, and costs. Valleses appealed.

{5} In affirming the district court’s judgment, the Court of Appeals applied the common law
control test and held that Perez was Reule’s employee and not a subcontractor. Reule Sun Corp.,
2008-NMCA-115, ¶¶ 11, 31. Then, relying on Mascareñas v. Jaramillo, 111 N.M. 410, 412, 806
P.2d 59, 61 (1991) and Latta v. Harvey, 67 N.M. 72, 75-76, 352 P.2d 649, 650-51 (1960) for the
proposition that “an employee is not a contractor and is therefore not required to obtain a

2
contractor’s license[,]” the Court concluded that it “need not reach the question of whether a duly
licensed contractor may recover for work performed by an unlicensed subcontractor.” Reule Sun
Corp., 2008-NMCA-115, ¶ 11.

{6} We granted Valleses’ petition for writ of certiorari, which raised three issues: (1) whether
the Court of Appeals erred when it applied the common law employee exception to the licensing
requirements of the CILA; (2) whether the Court of Appeals erred when it failed to review the
application of the facts under a de novo standard of review; and (3) whether an unlicensed business
entity can be an “employee” of a licensed entity. We hold that an individual who qualifies as a
“contractor” under the CILA’s definition is required to have a contractor’s license when performing
the specified acts described in the CILA, regardless of whether such an individual can be classified
as an employee of a licensed contractor. Because we hold that Reule is precluded from maintaining
an action for recovery of compensation for the work completed by Perez, we do not need to address
the remaining two issues.

II. DISCUSSION

A. STANDARD OF REVIEW

{7} We are asked to determine if the Court of Appeals erred when it applied a common law
employee exception to the CILA’s licensing requirements. This analysis is one of statutory
construction, which we review de novo. Bishop v. Evangelical Good Samaritan Soc’y, 2009-
NMSC-036, ¶ 8, 146 N.M. 473, 212 P.3d 361.

B. PRESERVATION

{8} Reule argues that Valleses failed to preserve the issue regarding the application of the
common law control test to determine if a contractor is exempted from the CILA’s licensing
requirements because they did not raise the issue in district court. Reule also argues that if
application of the common law control test was an error, this Court should nonetheless refrain from
reviewing the issue because the Valleses invited such error when they argued for its application
below. We disagree with both contentions.

{9} “To preserve a question for review it must appear that a ruling or decision by the
district court was fairly invoked . . . .” Rule 12-216(A) NMRA; see also Chrysler Credit
Corp. v. Beagles Chrysler-Plymouth, 83 N.M. 272, 273, 491 P.2d 160, 161 (1971) (a “matter not
brought to the attention of the trial court cannot be raised for the first time on appeal”).

{10} In the district court, Valleses did not argue that the Section 60-13-3(D)(13) exception was
the exclusive exception to the CILA’s licensing requirement for employees, nor did they argue that
classifying Perez as an employee via the common law control test was inappropriate. Valleses were
not required to raise either issue at the district court level. Until the district court and the Court of
Appeals employed the common law control test to determine that Perez was an employee and thus
exempt from the CILA’s licensing requirements, neither question now raised by Valleses was then

3
at issue. Rather, Valleses were only required to argue that the wage-earner exception was
inapplicable to exclude Perez from the CILA licensing requirements and the record indicates that
they had done so.

{11} The testimony solicited at trial regarding the nature of the work relationship between Reule
and Perez was primarily relevant to the question of whether Perez was a wage earner. For instance,
Perez testified that he was paid by contract and not by salary and Reule testified that Perez paid his
own taxes and was not an employee for tax purposes. Additionally, in their proposed findings of
fact, Valleses asserted that (1) Perez was not Reule’s employee at the time he entered into the
contract; (2) he did not receive a salary from Reule, but instead was paid on a contract-to-contract
basis; and (3) he provided Reule with his own federal and state tax identification numbers and was
doing business as Perez Plaster. Finally, Valleses specifically referenced the Section 60-13-3(D)(13)
exception to the CILA’s definition of “contractor” in their proposed conclusions of law. Thus,
Valleses adequately preserved the issue of whether the Section 60-13-3(D)(13) wage-earner
exception applied to Perez.

{12} We also hold that Valleses did not invite error when they referenced and included the
common law control test in their arguments in district court. We have held that “to invite error and
to subsequently complain about that very error would subvert the orderly and equitable
administration of justice.” State v. Collins, 2007-NMCA-106, ¶ 27, 142 N.M. 419, 166 P.3d 480
(internal quotation marks and citation omitted). A review of the record, however, indicates that
Valleses’ argument regarding the control test was an alternative argument to their primary
contention that Reule was barred from bringing an action for recovery under Section 60-13-30(A).
For instance, we find significant the sequence in which Valleses presented their proposed
conclusions of law to the district court. Valleses first referred to the CILA in their proposed
conclusions of law by including its purpose and specifically citing several of its subsections. They
included the licensing and certification requirements, as well as the remedy afforded to a consumer
who is a party to a construction contract with an unlicensed contractor of Subsections 60-13-1.1(A)
and (C). Valleses also specifically included Section 60-13-30(A)’s bar on recovery for unlicensed
contractors, the CILA’s definition of “contractor,” the wage-earner exception, Section 60-13-
3(D)(13), case law that stands for the proposition that contractors are prohibited from transferring
a license or certificate of qualification to another, and the penalties that may be incurred if a
contractor allows a contractor’s license to be used by an unlicensed person. Finally, Valleses
proposed that the court conclude that “[t]he work performed by Perez is required to be licensed” and
that “[Reule] violated the Act by permitting Perez . . . to work under [Reule’s] license to perform
the Contract.”

{13} Valleses only mentioned the common law control test after they proposed numerous
conclusions of law pertaining to their arguments that Reule was in violation of the CILA, precluding
them from recovery. Under the then-governing case law, the control test was used to exempt
individuals from the CILA’s licensing requirement. Valleses would have been remiss if they did
not argue in reference to the control test and would have run the risk of conceding the point to Reule.
Cf. Sullivan v. Sullivan, 82 N.M. 554, 555, 484 P.2d 1264, 1265 (1971) (holding that where a
defendant did not object to action at trial, he cannot complain about such action to the Supreme

4
Court). Valleses attempted to present a comprehensive case incorporating what they anticipated
would be the necessary arguments; they did not “invite” the use of the control test, but instead
referred to it in their argument because it was embedded in the inquiry. Granted, Valleses could
have been clearer and stated that the control test was an alternative argument. However, for
preservation purposes and in analyzing the invitation of error claim, we hold that the manner in
which Valleses referenced the control test in their arguments did not amount to an invitation of the
error.

C. STATUTORY ANALYSIS

{14} “The guiding principle of statutory construction is that a statute should be interpreted in a
manner consistent with legislative intent,” which is determined by looking “not only to the language
used in the statute, but also to the purpose to be achieved and the wrong to be remedied.” Hovet v.
Allstate Ins. Co., 2004-NMSC-010, ¶ 10, 135 N.M. 397, 89 P.3d 69. “We [will] give effect to the
legislative intent by adopting a construction which will not render the statute’s application absurd
or unreasonable and will not lead to injustice or contradiction.” Maes v. Audubon Indemnity Ins.
Group, 2007-NMSC-046, ¶ 11, 142 N.M. 235, 164 P.3d 934 (internal quotation marks and citation
omitted).

{15} Our statutory construction analysis begins by examining the words chosen by the Legislature
and the plain meaning of those words. State v. Hubble, 2009-NMSC-014, ¶ 10, 146 N.M. 70, 206
P.3d 579. “Under the plain meaning rule, when a statute’s language is clear and unambiguous, we
will give effect to the language and refrain from further statutory interpretation. We will not read
into a statute language which is not there, especially when it makes sense as it is written.” Id.
(internal quotation marks and citation omitted). In addition to the plain meaning examination, “[w]e
also consider the statutory subsection in reference to the statute as a whole and read the several
sections together so that all parts are given effect.” Bishop, 2009-NMSC-036, ¶ 11. Finally, the
practical implications, as well as the statute’s object and purpose are considered. Id.

1. Perez Was a “Contractor” Under the CILA and Was Required to Be Licensed

{16} To determine whether the Court of Appeals erred when it applied a common law employee
exception to the CILA licensing requirements, we must first determine if Perez was a “contractor”
under the meaning of the statute. The CILA defines a contractor as “any person who undertakes,
offers to undertake . . . by himself or through others, contracting. Contracting includes constructing,
altering, repairing, installing or demolishing any . . . building, stadium or other structure[.]” Section
60-13-3(A)(2). Additionally, the CILA includes subcontractors and specialty contractors in its
definition of contractors. Section 60-13-3(B). There is no dispute that Perez, by virtue of applying
stucco to Valleses’ house, was a contractor under the meaning of the CILA. Rather, the question
for us to determine is whether Perez falls within an exclusion and so is exempted from the CILA’s
licensing requirement.

{17} We next determine, therefore, whether Perez qualifies under one of the exceptions listed in
Section 60-13-3(D). This subsection lists several exceptions to the definition of a “contractor” under

5
the CILA. The most pertinent exception states that the definition of a “contractor” does not include
“an individual who works only for wages[.]” Section 60-13-3(D)(13).

{18} To determine the meaning of this exclusion, we first look to the plain meaning of the
language used by the Legislature. In this case, we have the benefit of the CILA’s statutory definition
of “wages.” Section 60-13-2(I) defines “wages” as “compensation paid to an individual by an
employer from which taxes are required to be withheld by federal and state law[.]” Id. Under the
plain meaning rule, and by reading the exception in conjunction with the statutory definition of
“wages,” we interpret the Section 60-13-3(D)(13) exception to exclude from the definition of a
“contractor” individuals who work only for compensation from which taxes are required to be
withheld by federal and state law. In this case, it is clear that Reule did not withhold Perez’s taxes.
Perez does not qualify under the wage-earner exception to the definition of a “contractor” under the
CILA and was thus required to possess a contractor’s license. Because the statutory language is
clear and unambiguous and its application to the facts of this case is straightforward, we “refrain
from further statutory interpretation.” See Hubble, 2009-NMSC-014, ¶ 10. We now discuss the
Court of Appeals’ decision not to address Section 60-13-30(A)’s preclusion following its
determination through the common law control test that Perez was Reule’s employee.

2. An Unlicensed Contractor’s Classification Under the Common Law Control Test as an
Employee of a Licensed Contractor Does Not Exempt the Unlicensed Contractor from
the CILA’s Licensing Requirements

{19} The Court of Appeals cited both Mascareñas, 111 N.M. at 412, 806 P.2d at 61, and Latta,
67 N.M. at 75-76, 352 P.2d at 650-51, for the proposition that “an employee is not a contractor and
is therefore not required to obtain a contractor’s license.” Reule Sun Corp., 2008-NMCA-115, ¶ 11.
The Court also quoted the control test language from Campbell v. Smith, 68 N.M. 373, 377, 362 P.2d
523, 525-26 (1961): “‘[t]he principal test to determine whether one is . . . an employee is whether
the employer has any control over the manner in which the details of the work are to be
accomplished.’” Reule Sun Corp., 2008-NMCA-115, ¶ 13. After examining the relationship
between Perez and Reule using the common law control test factors, the Court held that Perez was
Reule’s employee, and thus, the question of whether Reule could recover for work performed by
Perez did not need to be reached. Id. ¶¶ 11-15.

{20} Although the Court of Appeals cited Mascareñas, a careful review of that opinion reveals
that the Mascareñas Court actually analyzed the employer-employee relationship under the lens of
the Section 60-13-3(D)(13) wage-earner exception, and not the common law control test. 111 N.M.
at 412, 806 P.2d at 61 (“If [the contractor was a wage-earning employee], he was not required to
obtain a contractor’s license pursuant to NMSA 1978, Section 60-13-3(D)(13)”). Although the
Mascareñas Court did mention the common law control test, it did not use it in its analysis, but
instead based its decision on the fact that the contractor was not paid an hourly wage and did not
have time slips and tax forms. Id. Therefore, we do not include Mascareñas in the line of cases that
used the common law control test to determine whether a contractor is exempt from the CILA’s
licensing requirements.

6
{21} On the other hand, Latta and Campbell, did use the control test in determining whether a
contractor was exempt from the CILA’s licensing requirements. Given our previous holding in
Latta, the Court of Appeals appropriately analyzed the relationship between Perez and Reule under
the lens of the common law control test to determine whether Perez was Reule’s employee or an
independent contractor. Reule Sun Corp., 2008-NMCA-115, ¶¶ 11-15. After holding that Perez was
sufficiently under Reule’s control and therefore its employee, the Court also correctly followed
precedent when it held that Perez was not required to obtain a license, rendering the bar for recovery
articulated in Section 60-13-30(A) inapplicable. Reule Sun Corp., 2008-NMCA-115, ¶ 22. We now
take this opportunity to examine the history of the CILA as well as the rationale of our previous
holdings in Latta and Campbell to determine whether the common law control test remains
applicable.

{22} Since its enactment, the wage-earner exception has been incorporated into the CILA. In the
1939 session laws, the Legislature excepted wage earners from its definition of a “contractor”:

A contractor within the meaning of this act is a person, firm, . . . other than those
engaged in highway or railroad construction, who for either a fixed sum, price, fee,
percentage, or other compensation other than wages, undertakes or offers to
undertake, or purports to have the capacity to undertake to construct, alter, repair .
...

1939 N.M. Laws, ch. 197, § 3 (emphasis added). Likewise, in the 1953 compilation, the Legislature
retained the exception. NMSA 1953, § 67-16-3 (1939, as amended through 1947). In the context
of licensing requirements, the statute has never contained an exception for individuals who are
classified as “employees” by using control test factors.

{23} Despite the absence of an “employee” exception in the controlling statute, the Latta Court
nonetheless relied on an unlicensed contractor’s classification as an employee under the common
law control test to determine that the unlicensed contractor was barred from recovery. 67 N.M. at
75, 352 P.2d at 650-51. In that case, the plaintiff, an unlicensed contractor, was hired by one of the
defendants to work on a water well. Id. at 74, 352 P.2d at 650. After the work was unsuccessful,
both the plaintiff and that defendant agreed that the plaintiff would drill a second hole for a well and
conduct additional work on the first well. Id. The plaintiff completed the work on the first well and
moved his equipment to the location of the second well in preparation for further work. Id. The
plaintiff brought an action against the defendants for the value of drilling work and for furnishing
standby equipment and services. Id. The district court focused on the relationship between the
plaintiff and the defendant and concluded that the “plaintiff was at all material times hereto the
servant and employee of defendant.” Id. at 75, 352 P.2d at 650 (internal quotation marks omitted).
The district court rendered judgment in favor of the plaintiff and the defendants appealed. Id. at 74,
352 P.2d at 650.

{24} On appeal to this Court, the defendants contended that because the plaintiff did not have a
contractor’s license, and because his drilling was covered by the contractors licensing act as required
by NMSA 1953, Section 67-16-3, he was barred from recovering under NMSA 1953, Section 67-16-

7
14 (1939, as amended through 1947). Latta, 67 N.M. at 75, 352 P.2d at 650-51. The Latta Court
declined to address this contention because “the findings [made] it sufficiently plain that Latta was
an employee, and not an independent contractor. At all times, the right of control of the
performance of the work and the right to direct the manner in which the work would be done was
in [defendant].” Id. at 75, 352 P.2d at 651. Thus, the Latta Court concluded that the plaintiff was
not precluded from maintaining the action to recovery. Id. at 76, 352 P.2d at 651.

{25} The following year, in Campbell, this Court also analyzed the relationship between a
subcontractor and his employer by using the control test to determine whether the subcontractor was
subject to the licensing requirement of NMSA 1953, Section 67-16-3. 68 N.M. at 377-78, 362 P.2d
at 525-26. The defendants in Campbell hired the plaintiff subcontractor to construct a drive-in
theater, wherein the plaintiff was to be responsible for purchasing all the equipment and supplies and
for employing all necessary labor. Id. at 375, 362 P.2d at 524. The plaintiff alleged that he was to
have “sole supervision and direction of the construction” as well as managerial duties once the
theater was in operating condition. Id. The plaintiff was to receive a salary of $30 per week and a
share of annual profits for his construction work and as the theater’s manager. Id. The plaintiff
completed the construction, and three months after the theater opened for business, he quit due to
a disagreement with the defendants. Id. The plaintiff brought an action to recover the value of his
services in connection with the theater’s construction. Id. at 374, 362 P.2d at 524. A jury rendered
a verdict in favor of the plaintiff and the defendants appealed.

{26} On appeal, this Court used the control test to examine the relationship between the plaintiff
and the defendants to determine whether the plaintiff was an independent contractor or the
defendants’ employee: “[t]he principal test to determine whether one is an independent contractor
or an employee is whether the employer has any control over the manner in which the details of the
work are to be accomplished.” Id. at 377, 362 P.2d at 525-26. The Court further stated that “it is
the right to control, not the exercise of it, that furnishes the test.” Id. at 377, 362 P.2d at 526
(internal quotation marks and citation omitted). The Court found it significant that the defendants
did not have the right to “terminate the employment at will which was said to give the employer the
right to exercise control over the manner in which details of the work were to be exercised.” Id. at
378, 362 P.2d at 526. Thus, the Court held that the plaintiff was an independent contractor under
the meaning of NMSA 1953, Section 67-16-3, and because he failed to allege that he had a
contractor’s license, he was precluded from maintaining the action by NMSA 1953, Section 67-16-
14. Campbell, 68 N.M. at 378, 362 P.2d at 526.

{27} The Courts’ creation of an “employee” exception is a clear deviation from the CILA. From
its inception, the CILA has excluded individuals receiving compensation in the form of “wages”
from the definition of “contractor” and from its licensing requirements. Never has the CILA
provided that individuals who may be classified as “employees” under the control test be excepted
from the definition of a “contractor,” nor be exempt from its licensing requirements. Thus, the Latta
and Campbell Courts improperly read a control test “employee” exception into the statute and
effectively broadened the statutory exclusion beyond the scope that the Legislature intended.

{28} In response to Latta and Campbell, the Legislature effectively abrogated the common law

8
control test as applied to the CILA by adding the definition of “wages” to the definitions section of
the statute: “‘wages’ means compensation paid to an individual by an employer from which taxes
are required to be withheld by federal and state law.” 1967 N.M. Laws, ch. 199, § 2(I). This
addition emphasized the Legislature’s intent to limit the exception relating to employees only to
wage earners, as opposed to the broader category of employees. Furthermore, the wage-earner
exception was made more explicit when the Legislature reformatted the statute. The paragraph once
containing the definition of a “contractor,” along with its exceptions, was transformed into three
different subsections. Compare 1939 N.M. Laws, ch. 197, § 3, and NMSA 1953, § 67-16-3, with
1967 N.M. Laws, ch. 199, § 3. The wage-earner exception was placed into its own subsection,
Section 3(C)(13), and it provided that a “contractor” does not include “an individual who works only
for wages[.]” 1967 N.M. Laws, ch. 199, § 3(C)(13).

{29} We interpret the Legislature’s addition of the definition of “wages,” along with the statute’s
restructuring, as a repudiation of the control test as applied to the CILA. We hereby overrule the
Latta-Campbell line of cases to the extent that they may be interpreted to allow an unlicensed
contractor to be exempt from the CILA’s licensing requirement because such a contractor may be
classified as an employee of a licensed contractor under the common law control test. The
Legislature has expressly designated wage earners to be excepted under the definition of
“contractors” and to allow an individual, who would otherwise be required to have a license, to
nonetheless be exempt because such an individual was under the “control” of a licensed contractor,
would be adding an exception to the statute.

{30} We next address Reule’s contention that the Legislature has adopted the common law control
test as evidenced by the addition of NMSA 1978, Section 60-13-3.1 (2005). Section 60-13-3.1 is
titled “Employer and employee relationship; independent contractor; improper reporting; penalty;
license sanctions[,]” and it provides:

for purposes of the employer and employee relationship within those construction
industries subject to the Construction Industries Licensing Act, a contractor who is
an employer shall consider a person providing labor or services to the contractor for
compensation to be an employee of the contractor and not an independent contractor
unless the following standards indicative of an independent contractor are met[.]

The statute then lists six different standards, only one of which must be met to classify the individual
as an independent contractor and not as an employee. In particular, the first standard provides that
an individual is considered an independent contractor if “the person providing labor or services is
free from direction and control over the means and manner providing the labor or services, subject
only to the right of the person for whom the labor or services are provided to specify the desired
results.” Section 60-13-3.1(A)(1) (emphasis added). It may be tempting to equate the use of the
specific language in Section 60-13-3.1(A)(1), which is consistent with the common law control test,
and its placement at the beginning of the CILA with the Legislature’s intent to adopt the common
law control test for all CILA purposes. However, we disagree and hold that Section 60-13-3.1 does
not reflect such an intent when determining whether a contractor is required to be licensed.

9
{31} The language contained in Section 60-13-3.1(A)(1) is consistent with the common law
control test only in the context of examining the employer-employee relationship to classify a
contractor as either an employee or an independent contractor. See § 60-13-3.1(A) (“for purposes
of the employer and employee relationship . . . an employer shall consider a person providing labor
or services to the contractor for compensation to be an employee of the contractor and not an
independent contractor unless the following standards indicative of an independent contractor are
met”) (emphasis added)). There is no language contained in this section that indicates that the
classification of a contractor as an employee will exempt such contractor from the CILA’s licensing
requirements or serve as an exception to the definition of “contractor.”

{32} Further, as indicated in the compiler’s note, Section 60-13-3.1 was not enacted as part of the
CILA: “[t]his section was not enacted as part of the Construction Industries Licensing Act but has
been compiled here for the convenience of the user.” Thus, because the compiler and not the
Legislature determined the location of this section in the statutes, the application effect normally
present in sections placed at the beginning of an act, such as the purpose and general definition
sections, is not present in this instance. See, e.g., Wilschinsky v. Medina, 108 N.M. 511, 517, 775
P.2d 713, 719 (1989) (noting that when the Legislature provides definitions as part of a statute, those
definitions are binding on the courts interpreting the statute).

{33} Also, reading the different subsections of Section 60-13-3.1 as a whole indicates that the
employer-employee analysis is not applicable in the context of licensing, but instead in the context
of unfair labor practice. See § 60-13-3.1(C) (describing the punishment for a contractor who
intentionally and willfully reports an employee as an independent contractor when the employee
does not meet the standards in Subsection A); § 60-13-3.1(D) (describing the implications of a
conviction of a contractor for violating Subsection C). Thus, we hold that Section 60-13-3.1 does
not indicate that the Legislature intended to adopt the common law control test for licensing
requirement determinations.

{34} Allowing an individual to whom the CILA’s definition of “contractor” applies, but who may
also be classified as an employee of a licensed contractor via the common law control test, to be
exempt from the CILA’s licensing requirement impermissibly adds an exception to the statute. In
addition, the Legislature has not adopted the control test for license requirement purposes. As a
result, an unlicensed contractor’s classification as an employee of a licensed contractor via the
common law control test does not exempt the unlicensed contractor from the CILA’s licensing
requirements. Therefore, regardless of Perez’s classification under the common law control test, he
was required to have a license for the work he performed on Valleses’ house.

{35} Given that Perez was not exempt from the CILA’s licensing requirement, we now turn to the
applicability of Section 60-13-30(A).

3. Section 60-13-30(A) Precludes Reule from Collecting Compensation for Work
Performed by Perez

{36} Section 60-13-30(A) provides:

10
 No contractor shall act as agent or bring or maintain any action in any court of the
state for the collection of compensation for the performance of any act for which a
license is required by the Construction Industries Licensing Act without alleging and
proving that such contractor was a duly licensed contractor at the time the alleged
cause of action arose.

(Emphasis added.) Applying the plain meaning rule to this section, the word “such” denotes that
a contractor is prohibited from bringing any action to collect compensation for the work that
particular contractor performed if he or she was unlicensed at the time of performance. Applying
this interpretation to the facts of this case, it is clear that Perez, because he was not licensed at the
time the alleged cause of action arose, would be prohibited from bringing or maintaining an action
for compensation. However, the facts of this case present a different situation since a licensed
contractor is attempting to maintain an action to collect compensation for work performed by
another contractor; in this case, an unlicensed one.

{37} This section of the CILA expressly prohibits a contractor in a multi-party situation from
acting as an agent for an unlicensed contractor during the collection process. Section 60-13-30(A).
Black’s Law Dictionary defines “agent” as “One who is authorized to act for or in place of another;
a representative . . . .” Black’s Law Dictionary 72 (9th ed. 2009). In this case, the record is clear
that Perez has no stake in the outcome of the case. He has already been fully compensated by Reule
for the work he completed and is not seeking any other form of compensation. Thus, Reule is not
“acting for or in place of” Perez and cannot be considered his agent. We must now determine
whether a licensed contractor is precluded from bringing or maintaining an action to collect
compensation for work performed by an unlicensed contractor for whom the licensed contractor is
not acting as an agent.

{38} Reading Section 60-13-30(A) as it relates to the CILA as a whole, we hold that it precludes
a licensed contractor from bringing or maintaining an action to collect compensation for work
performed by an unlicensed subcontractor. The purpose of the CILA is to “promote the general
welfare of the people of New Mexico by providing for the protection of life and property by
adopting and enforcing codes and standards for construction, alteration, installation, connection,
demolition and repair work.” Section 60-13-1.1. The CILA further states that:

To effect this purpose, it is the intent of the legislature that . . . examination,
licensing and certification of the occupations and trades within the jurisdiction of the
Construction Industries Licensing Act be such as to ensure or encourage the highest
quality of performance and to require compliance with approved codes and standards
and be, to the maximum extent possible, uniform in application, procedure and
enforcement.

Section 60-13-1.1(A).

{39} The Legislature effects its purpose by requiring an applicant for a license to undergo
extensive training and to have considerable construction experience and, once licensed, to comply

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with stringent standards and codes under the penalty of law. See, e.g., § 60-13-12(A) & (B)
(prohibiting an unlicensed contractor from (1) acting as a licensed contractor for work specified in
the Act, and (2) bidding on a contract); § 60-13-14(B)(8) (requiring an applicant for a license to
“have had four years, within the ten years immediately prior to application, of practical or related
trade experience dealing specifically with the type of construction or its equivalent for which the
applicant is applying for a license”); § 60-13-23 (listing the grounds for a license suspension or
revocation); § 60-13-59(C) & (D) (requiring every building permit to contain the name and license
number of the general contractor and for it to be prominently displayed at the construction site).

{40} In addition, the CILA contains provisions that effect its purpose by prohibiting an individual
who has not undergone the stringent application procedures and who has not met the experience
requirements from obtaining a license or from using another’s license. See, e.g., § 60-13-13.2
(providing that the “division shall not accept an application, shall not issue a license and shall
require a change in the name of a proposed license if the proposed name is identical to or . . . so
similar that it may cause confusion with a name on a pending application or an existing license”);
§ 60-13-18(A) (prohibiting the transferring of licenses). By not allowing a contractor’s license to
be transferred either intentionally or inadvertently to another individual, it is more likely that a
person who has undergone the necessary training and testing will actually preform the activities
specified in the Act. This is aligned with the stated purpose of “ensur[ing] or encourag[ing] the
highest quality of performance” for the people of New Mexico. See § 60-13-1.1(A).

{41} When reading Section 61-13-30(A) together with the other provisions in the CILA and
considering its practical implications, we hold that our decision to preclude a licensed contractor
from collecting for work performed by an unlicensed contractor is aligned with the CILA’s purpose.
This preclusion would encourage licensed contractors to hire only licensed individuals, which
comports with the CILA’s strict application and experience requirements because it does not allow
for unlicensed contractors to evade the stringent standards otherwise required by the Act. Also,
because our interpretation would not allow a licensed contractor who hires unlicensed contractors
under the guise of his or her license to go unpunished, it reinforces the CILA’s prohibition against
the transferring of licenses. Further, our interpretation aligns with those provisions that provide
penalties for non-compliance. Thus, when we read the CILA in its entirety and “construe each part
in connection with every other part to produce a harmonious whole,” see State v. Javier M., 2001-
NMSC-030, ¶ 27, 131 N.M. 1, 33 P.3d 1 (internal quotation marks and citation omitted), and
consider the practical effects of our interpretation, Section 60-13-30(A) precludes a licensed
contractor from collecting for work performed by an unlicensed contractor.

{42} We did consider the competing practical considerations: the possibility that individuals such
as Valleses in this case may be unjustly enriched if a licensed contractor is precluded from collecting
compensation for work done by unlicensed individuals. However, our holding in Triple B Corp. v.
Brown & Root, Inc., 106 N.M. 99, 102, 739 P.2d 968, 971 (1987), has already addressed these
competing policies:

We will not recognize an equitable defense of unjust enrichment because the
Legislature in Section 60-13-30 necessarily authorized the unjust enrichment of the

12
 recipients of work performed by unlicensed contractors. In order to protect the
public from irresponsible or incompetent contractors, the Legislature chose to
harshly penalize unlicensed contractors by denying them access to the courts to
collect compensation for work performed. Its policy must override the judicial
principle that disfavors unjust enrichment.

(Internal citation omitted.) Thus, given the CILA’s purpose, our holding aims to protect the general
public and does not focus on those contractors who gamble when hiring unlicensed subcontractors
to complete work for which a license is required.

III. CONCLUSION

{43} We hold that an individual who qualifies as a contractor under the CILA is required to have
a license when performing the specified acts as described in the CILA, regardless of whether such
an individual can be classified as an employee of a licensed contractor under the common law
control test. Perez was not exempt from the CILA’s licensing requirement, and Reule was therefore
precluded by Section 60-13-30(A) from bringing or maintaining an action for collection. We reverse
the Court of Appeals and vacate the district court’s judgment in favor of Reule.

{44} IT IS SO ORDERED.

______________________________________
PATRICIO M. SERNA, Justice

WE CONCUR:

____________________________________
EDWARD L. CHÁVEZ, Chief Justice

____________________________________
PETRA JIMENEZ MAES, Justice

____________________________________
RICHARD C. BOSSON, Justice

____________________________________
CHARLES W. DANIELS, Justice

Topic Index for Reule Sun Corp. v. Valles, No. 31,192

MS MISCELLANEOUS STATUTES
MS-CL Construction Industries Licensing Act

ST STATUTES

13
ST-AP Applicability
ST-IP Interpretation
ST-RC Rules of Construction

14