The Rule of AVL Test Systems, Inc. v. Hensel Phelps Construction Co. is that whether goods installed "become a fixed part of the structure" under Business and Professions Code section 7045's exemption from contractor licensing requirements is a question of fact that cannot be resolved on summary judgment when competing expert evidence exists, under circumstances involving complex equipment installation with substantial connections to the structure.
Appeal from judgment after summary judgment in Superior Court, Riverside County.
Defendant Appellant was AVL Test Systems, Inc. — the manufacturer of vehicle emissions testing equipment that sought payment for supplying and installing its products in a building constructed for the California Air Resources Board.
Plaintiff Respondent was Hensel Phelps Construction Co. — the general contractor who defended against AVL's payment claims on grounds that AVL violated contractor licensing laws by performing work without proper licensure.
The suit sounded in declaratory relief regarding contractor licensing requirements under the Contractors State Licensing Law (CSLL). AVL sought a declaration that its claims for payment were not barred by Business and Professions Code section 7031(a) for performing acts requiring licensure without a license.
The key substantive facts leading to the suit were AVL entered a contract with Hensel Phelps to supply and install vehicle emissions testing equipment in a CARB building, AVL performed substantial work and was paid over $73 million before filing arbitration demands for additional payments, and Hensel Phelps defended claiming AVL's unlicensed work barred recovery under section 7031(a). AVL obtained a contractor's license in May 2019 but had performed work before obtaining the license.
The procedural result leading to the Appeal: The trial court granted Hensel Phelps's motion for summary judgment and denied AVL's cross-motion, ruling that section 7045 did not exempt AVL from contractor licensing requirements because the evidence showed the emissions equipment became a "fixed part of the structure."
The key question(s) on Appeal: Whether the trial court erred in resolving as a matter of law that AVL's equipment became a "fixed part of the structure" under section 7045, thereby precluding AVL from the licensing exemption.
The Appellate Court held that the trial court erred in granting summary judgment because competing expert declarations created triable issues of material fact regarding whether AVL's equipment became a "fixed part of the structure" under section 7045, and this determination is inherently factual requiring consideration of multiple factors including removability, permanence of connections, reusability, and design for replacement.
The case is inapplicable when there is no competing expert evidence on the "fixed part of the structure" analysis, when the factual record is undisputed regarding the nature and permanence of the installation, or when dealing with equipment or products that clearly fall within established categories of fixed or non-fixed installations.
The case leaves open the ultimate factual determination of whether AVL's specific emissions testing equipment became a "fixed part of the structure," the precise weighting of the various factors courts should consider in making this determination, and whether AVL's use of licensed subcontractors affects the section 7045 analysis.
Counsel
For Appellant: Crowell & Moring, David J. Ginsberg, J. Daniel Sharp, Andrew Holmer, Kenneth Taketa, and Kari G. Ferver
For Respondent: Pillsbury Winthrop Shaw Pittman, Stephen L. Pessagno; Varela, Lee, Metz & Guarino, Holly M. Brett; Thompson Hine, and R. Michael Viayra, Jr.
Amicus curiae: [None identified]