Walker v. Appellate Division of the Superior Court etc.

Filed 8/22/17
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FIVE
MICHAEL KERR WALKER, No. B280100
Petitioner, (App. Div. No. BR052772 &
Super. Ct. No. 5WA25326)
v.
APPELLATE DIVISION OF THE
SUPERIOR COURT OF LOS
ANGELES COUNTY,
Respondent;
THE PEOPLE,
Real Party in Interest.
ORIGINAL PROCEEDINGS; petition for writ of
mandate. Patti Jo McKay, Alex A. Ricciardulli, and Barbara
R. Johnson, Judges. Petition granted in part and denied in
part.
Kelly G. Emling, Chief Deputy Public Defender, Albert
J. Menaster, Nick Stewart-Oaten, Deputy Public Defenders,
for Petitioner.
No appearance for Respondent.
Joseph Lawrence, Interim City Attorney, Yibin Shen,
Chief Deputy City Attorney, Melanie Skehar, Deputy City
Attorney, for Real Party in Interest.
_________________________
Petitioner Michael Kerr Walker entered a plea of no
contest to a misdemeanor count of contracting without a
license. (Bus. & Prof. Code, § 7028, subd. (a).)1 As a
condition of probation, the trial court ordered Walker to pay
restitution for the actual economic loss suffered by the
victim, but denied the People’s request to require Walker to
make full restitution of all payments he received for his
construction services and attorney fees incurred by the
victim. On appeal by the People, the Appellate Division of
the Superior Court of Los Angeles County reversed in a
published opinion, holding that the victim was entitled to
restitution for the full amount she paid to Walker, plus
interest, as well as her attorney fees. In his petition for writ
of mandate, Walker contends the Appellate Division erred in
requiring criminal restitution in a manner intended to apply
to civil actions, and by ordering restitution of attorney fees
in an amount not proven by substantial evidence. We
1Undesignated statutory references are to the
Business and Professions Code.
2
conclude that the civil disgorgement statute relied on by the
Appellate Division does not control the amount of restitution
in a criminal action. We further conclude that the Appellate
Division did not err in ordering restitution of Curto’s
attorney fees. We therefore grant the mandate petition in
part and deny in part.
FACTUAL AND PROCEDURAL HISTORY
In August 2013, Sharon Curto entered into a written
construction contract with Walker, an unlicensed contractor,
to paint her home and to install 10 new windows. The
original contract price was for $49,860. As the work
progressed, additional work was added to the project and
additional invoices were issued by Walker. On November
30, 2013, Walker sent Curto a demand letter stating she
owed him $9,851. At that point, Curto had paid Walker a
total of $61,428. Curto subsequently paid Walker $2,000
against the $9,851 balance. Walker initiated a lawsuit
against Curto for nonpayment of the full amount due. Curto
hired an attorney to defend her in the lawsuit.2 Curto filed a
complaint against Walker with the California Department of
Consumer Affairs Contractors State License Board (Board).
During the investigation, the Board discovered Walker was
not a licensed contractor and referred the matter to the
Santa Monica City Attorney for criminal prosecution.
2 Walker’s complaint and the related proceedings are
not provided in the record.
3
On November 4, 2015, Walker entered his plea of no
contest to a violation of section 7028, subdivision (a). The
court suspended imposition of sentence, and placed Walker
on summary probation for two years. The court set a
hearing to determine the amount of restitution Walker
would be ordered to pay Curto as a condition of his
probation.
The trial court conducted an extensive restitution
hearing over the course of four days, which included briefing
by both parties. The People’s brief requested the court order
Walker to pay Curto the entire amount she had paid him for
his work, plus interest, and attorney fees incurred in the
civil action. Later, the People increased the restitution
request to include the cost for Curto to install one and a half
windows that were not installed by Walker, and to repair
and repaint her house.
The trial court denied the People’s request for a full
refund of Curto’s payments to Walker. The court further
denied Curto attorney fees incurred in the civil action.
However, the court allowed the People to establish the actual
economic loss suffered by Curto. Curto testified that
Walker’s work was substandard because the paint was
fading, chipping, bubbling, and peeling. In December 2015,
Curto obtained an estimate of $15,800 to repair and repaint
her house. Curto further testified that Walker did not
complete the window installation, as he only replaced eight
and a half out of the ten windows. Curto obtained an
estimate from the Board suggesting that it will cost at least
4
$625 to complete the window installation. Sylvester Egan, a
licensed contractor and expert witness for the defense,
testified that constant maintenance is required on all paint
jobs due to a house’s natural weathering.
The trial court ordered Walker to pay restitution in the
amount of $1,299. This figure consisted of $1,250 for the
installation of the one and a half windows, covering the cost
of labor and materials. The court accepted as reasonable
Curto’s $15,800 repair and repainting estimate, but found a
substantial portion was necessitated by normal weathering
rather than Walker’s substandard performance. Therefore,
the court discounted this amount by one-half ($7,900). The
court then subtracted $9,150 ($7,900 for the paint repair
plus $1,250 for the windows) from the amount that was
unpaid to Walker ($9,150 minus $7,851), which left a
balance of $1,299 in economic loss.
The People filed a Notice of Appeal from the trial
court’s restitution order. On November 16, 2016, the
Appellate Division reversed the restitution order in a
published decision. (People v. Walker (2016) 6 Cal.App.5th
Supp. 38.) The Appellate Division held the trial court
abused its discretion in not ordering full restitution for all
compensation Curto paid to Walker, plus interest, as well as
not ordering attorney fees incurred in the civil action. (Id. at
pp. 43-46.) In reaching its decision, the Appellate Division
relied on section 7031, which provides that an unlicensed
contractor cannot not sue for payment of his unlicensed
work, and the homeowner has the right to bring a civil
5
action to recover all sums paid to him. (Id. at p. 43.) The
Appellate Division recognized that section 7031 is not
directly applicable in a criminal case, however, “the impact
of the statute means, in practical terms, that the homeowner
parted with her money in a situation where she did not have
to do so. Thus, even if the work performed by [Walker]
bestowed a benefit to the homeowner, she nonetheless
incurred an economic loss for purposes of her constitutional
and statutory right to restitution (see Cal. Const. art. I, § 28,
subd. (a), Pen. Code, § 1202.4, subd. (a)(1)) in the amount of
all monies paid to him for his unlicensed work. In addition,
[Curto] was entitled to restitution of attorney fees incurred
in defending against [Walker’s] civil action for unpaid
compensation and in prosecuting her counterclaim to recover
the money she paid [Walker] under the contract. (See Pen.
Code, § 1202.4, subd. (f)(3)(H).)” (Id. at p. 40.) On December
5, 2016, Walker’s petition for rehearing was denied.
On December 20, 2016, this court declined to exercise
its authority to transfer jurisdiction of the matter to this
court. On February 3, 2017, we summarily denied Walker’s
petition for writ of mandate. On March 29, 2017, the
California Supreme Court granted Walker’s petition for
review and transferred the matter back to this court, with
directions to vacate our February 3, 2017 order and direct
the respondent to show cause why relief sought in the
petition should not be granted. We complied with the orders
from the Supreme Court by vacating our order denying the
petition for writ of mandate and issuing the order to show
6
cause as directed. We now proceed to consider the merits of
the petition.
DISCUSSION
“Restitution is constitutionally and statutorily
mandated in California.” (People v. Keichler (2005) 129
Cal. App. 4th 1039, 1045 (Keichler); see Cal. Const., art. 1,
§ 28; Pen. Code, § 1202.4.) Penal Code section 1202.4,
subdivision (f) provides for a direct restitution order “in
every case in which a victim has suffered economic loss as a
result of the defendant’s conduct.” “The order is to be for an
amount ‘sufficient to fully reimburse the victim or victims for
every determined economic loss incurred as the result of the
defendant’s criminal conduct.’ (Id., § 1202.4, subd. (f)(3).)”
(People v. Brasure (2008) 42 Cal. 4th 1037, 1074-1075.) A
person who utilizes the services of a convicted unlicensed
contractor is eligible for restitution for economic losses (Pen.
Code, § 1202.4, subd. (f)), regardless of whether he or she
had knowledge that the contractor was unlicensed. (§ 7028,
subd. (h).)
“‘The standard of review of a restitution order is abuse
of discretion. “A victim’s restitution right is to be broadly
and liberally construed.” [Citation.] “‘When there is a
factual and rational basis for the amount of restitution
ordered by the trial court, no abuse of discretion will be
found by the reviewing court.’” [Citations.]’ [Citation.]”
(People v. Baker (2005) 126 Cal. App. 4th 463, 467.) “In
7
reviewing the sufficiency of the evidence, the ‘“power of the
appellate court begins and ends with a determination as to
whether there is any substantial evidence, contradicted or
uncontradicted,” to support the trial court’s findings.’
[Citations.] Further, the standard of proof at a restitution
hearing is by a preponderance of the evidence, not proof
beyond a reasonable doubt. [Citation.]” (Id. at pp. 468-469.)
The trial court “‘“must use a rational method that could
reasonably be said to make the victim whole, and may not
make an order which is arbitrary or capricious.”’ [Citation.]”
(Keichler, supra, 129 Cal.App.4th at p. 1045.)
The Appellate Division erred in holding that the trial
court abused its discretion, as there was a factual and
rational basis for the restitution order. The plain language
of Penal Code section 1202.4 limits the trial court’s
restitution order to actual economic losses suffered by the
victim in the circumstances of this case. (Pen. Code,
§ 1202.4, subd. (f)(3)(A) [restitution order should be “the
actual cost of repairing the property when repair is
possible”].) The restitution order is not intended to provide
the victim with a windfall; instead, a victim is entitled to
reimbursement only for his or her actual loss. (People v.
Millard (2009) 175 Cal. App. 4th 7, 28; People v. Fortune
(2005) 129 Cal. App. 4th 790, 794-795.) There is no
requirement the restitution order “reflect the amount of
damages that might be recoverable in a civil action.” (People
v. Carbajal (1995) 10 Cal. 4th 1114, 1121; see People v.
Chappelone (2010) 183 Cal. App. 4th 1159, 1173.) Here, the
8
trial court’s restitution order provided for Curto’s actual
economic loss, which was determined to be the cost of
installing the remaining windows and repainting her house,
adjusted by the full amount she still owed to Walker for his
services. Under the plain language and meaning of Penal
Code section 1202.4, subdivision (f), a restitution order
limiting recovery to the victim’s actual economic losses was
well within the discretion of the trial court.
The Appellate Division’s reliance on section 7031 to
support full recovery was misplaced. As the Appellate
Division acknowledged, the plain language of Business and
Professions section 7031 restricts the statute to civil
proceedings. (§ 7031, subd. (b) [“a person who utilizes the
services of an unlicensed contractor may bring an action in
any court of competent jurisdiction in this state to recover all
compensation paid to the unlicensed contractor for
performance of any act or contract”].)
Contrary to the Appellate Division’s analysis, the
Legislature did not intend section 7031 to define the amount
of criminal restitution under section 7028. In 2009, the
Legislature passed Assembly Bill No. 370, which added
subdivision (h) to section 7028. (Stats. 2009, ch. 319, § 1.)
Subdivision (h) currently provides: “For any conviction
under this section, a person who utilized the services of the
unlicensed person is a victim of a crime and is eligible,
pursuant to subdivision (f) of Section 1202.4 of the Penal
Code, for restitution for economic losses, regardless of
whether he or she had knowledge that the person was
9
unlicensed.” Assembly Bill No. 370 does not indicate that
the Legislature contemplated that section 7031 would apply
to fix the amount of restitution in criminal cases. To the
contrary, the Legislature declared that “[c]urrent law states
that a person who uses an unlicensed contractor may bring a
civil action to recover all compensation paid to the
unlicensed contractor. However, no statute specifically
addresses the issue of criminal restitution for victims of
unlicensed contractors.” (Assem. Com. on Bus. and Prof.,
Analysis of Assem. Bill No. 370 (2009-2010 Reg. Sess.) Mar.
31, 2009, p. 2.) “Consumers who intentionally hire an
unlicensed contractor can already receive all the payments
made to the unlicensed contractor through the civil courts
(Business and Professions Code Section 7031(b)). This bill is
mainly targeted at helping consumers who have few
resources and little understanding of the process (filing civil
cases, checking whether a contractor is licensed or not, etc.)
and making it easier for [consumers] to receive
compensation for only their economic losses. This bill would
also make gaining restitution from an unlicensed contractor
in criminal courts more consistent with existing law
regarding restitution in civil courts.” (Dept. Consumer
Affairs, Enrolled Bill Rep. on Assem. Bill No. 370 (2009-2010
Reg. Sess.) June 29, 2009, p. 4, italics added.) The sponsor of
Assembly Bill No. 370, Los Angeles City Attorney Rocky
Delgadillo, specifically stated that section 7031 only applies
to a civil action and emphasized the need for a criminal
counterpart. (Sen. Com. on Business, Professions and
10
Economic Development, Analysis of Assem. Bill No. 370
(2009-2010 Reg. Sess.) June 8, 2009, p. 3 [“Business and
Professions Code 7031(b) states that a person who uses an
unlicensed contractor may bring a civil action to recover all
compensation paid to the unlicensed contractor. However,
no statute specifically addresses the issue of criminal
restitution for victims of unlicensed contractors”].)
Delgadillo’s successor, Carmen A. Trutanich, wrote a letter
to Governor Arnold Schwarzenegger on September 23, 2009,
urging him to sign Assembly Bill No. 370. Trutanich stated,
“Presently, our civil laws (§ 7031(b)) specifically mandate
that unlicensed contractors disgorge all monies paid by their
victims (more than just economic loss) . . . . However, our
current criminal laws do not clearly require unlicensed
contractors to pay restitution for even the economic loss.”
(City Attorney Carmen A. Trutanich, letter to Governor
Arnold Schwarzenegger re Assem. Bill No. 370 (2009-2010
Reg. Sess.) Sept. 23, 2009, Governor’s chaptered bill files, ch.
319.) City Attorney Trutanich concluded, “This bill provides
victims with restitution, limited to economic loss, should
they hire an unscrupulous unlicensed contractor who
performs poor shoddy workmanship.” (Ibid.)
Under the statutory scheme, the civil remedy of
refunding “all compensation paid” is intended to deter
unlicensed contractors by depriving them of all monetary
benefit (§ 7031, subd.(b)). The restitution statute, in
contrast, serves primarily to compensate victims for actual
economic losses. Unlike section 7031, section 1202.4 of the
11
Penal Code does not provide for a full refund of all payments
to an unlicensed contractor. A victim who is made whole for
economic losses under Penal Code section 1202.4 remains
able to pursue the civil law remedy of a full refund. (People
v. Vasquez (2010) 190 Cal. App. 4th 1126, 1132 [“An order of
restitution pursuant to [Penal Code] section 1202.4 does not
preclude the crime victim from pursing a separate civil
action based on the same facts from which the criminal
conviction arose”].) We conclude that the trial court acted
within its discretion in ordering restitution for the actual
economic loss suffered by Curto. Therefore, the decision in
People v. Walker (2016) 6 Cal.App.5th Supp. 38, is
disapproved to the extent it relied on the civil disgorgement
statute to impose criminal restitution.
Attorney Fees
Contrary to Walker’s contention, the Appellate
Division did not err in holding the trial court abused its
discretion in failing to order Curto attorney fees. At trial,
the People sought restitution for Curto’s attorney fees
incurred in the civil action, totaling to $6,526.63. The People
argued Curto had to hire an attorney to recover her economic
loss and prevent further economic losses “stemming from
[Walker’s] unlicensed and unlawful activities.” The People
attached to their brief what appears to be an email from
Curto’s counsel stating the amount of attorney fees expended
in the civil case. (People v. Millard, supra, 175 Cal. App. 4th
12
at p. 26 [“a prima facie case for restitution is made by the
People based in part on a victim’s testimony on, or other
claim or statement of, the amount of his or her economic
loss”]; People v. Gemelli (2008) 161 Cal. App. 4th 1539,
1542-1543 [Penal Code “[s]ection 1202.4 does not, by its
terms, require any particular kind of proof].)
Penal Code section 1202.4, subdivision (f)(3)(H)
provides that economic loss for the purposes of victim
restitution includes “[a]ctual and reasonable attorney’s fees
and other costs of collection accrued by a private entity on
behalf of the victim.” Reasonable attorney fees incurred by
the victim are recoverable as an item of restitution only to
the extent that they were incurred in efforts to recover
economic damages sustained by the victim as a result of the
criminal conduct. (People v. Fulton (2003) 109 Cal. App. 4th
876, 879, 884-885.) Walker initiated the civil action,
erroneously because he was not a licensed contractor, to
recover the remaining balance on the contract. Curto
retained counsel for the purpose of recovering her economic
loss and prevent further economic loss “stemming from
[Walker’s] unlicensed and unlawful activities.” The evidence
is undisputed Curto incurred attorney fees due to Walker’s
ill-conceived action. Therefore, the Appellate Division did
not err in holding that the trial court abused its discretion in
failing to award Curto restitution for attorney fees incurred
in efforts to recover her economic damages as a result of
Walker’s work as an unlicensed contractor.
13
DISPOSITION
Let a peremptory writ of mandate issue directing the
Appellate Division of the Superior Court of Los Angeles
County to vacate its prior opinion and issue a new opinion
affirming the trial court’s restitution order as to the victim’s
actual economic losses, but reversing the trial court’s
restitution order as to the victim’s attorney fees.
KRIEGLER, Acting P. J.
I concur:
DUNNING, J.3
 Judge of the Orange Superior Court, assigned by the
Chief Justice pursuant to article VI, section 6 of the
California Constitution.
14
Michael Kerr Walker v. The Appellate Division of the
Superior Court of Los Angeles County
B280100
BAKER, J., Concurring in Part and Dissenting in Part
Business and Professions Code section 7028 provides
that a victim who uses the services of a person convicted of
operating as an unlicensed contractor “is eligible, pursuant
to subdivision (f) of Section 1202.4 of the Penal Code, for
restitution for economic losses, regardless of whether he or
she had knowledge that the person was unlicensed.” (Bus. &
Prof. Code, § 7028, subd. (h), emphasis added.) Another
provision of the Business and Professions Code, section 7031,
states that “a person who utilizes the services of an
unlicensed contractor may bring an action in any court of
competent jurisdiction in this state to recover all
compensation paid to the unlicensed contractor for
performance of any act or contract.” (Bus. & Prof. Code,
§ 7031, subd. (b), emphasis added.) Defendant Michael
Walker (defendant) sustained a conviction for acting in the
capacity of a contractor without a license, and the People
attempted to recover the full amount his victim, Sharon
Curto (Curto), paid him as restitution under Business and
Professions Code section 7028—Curto did not then bring a
separate civil action as authorized by Business and
Professions Code section 7031. For reasons I will explain, I
believe the issue of whether the trial court’s restitution
award was proper turns less on a question of statutory
interpretation and more on the question of whether the trial
court’s restitution calculation was an abuse of its discretion.
Although the Legislature’s statutory scheme invites
needless civil litigation, I agree with the majority that
Business and Professions Code section 7031 cannot be used
to interpret the applicable criminal restitution statutes so as
to require an unlicensed contractor to make restitution in
the amount of all payments the contractor received.1 But
concluding Business and Professions Code section 7031 is
not a reliable interpretive guide still leaves another
1 I do concede, though, that there are elements in the
legislative history of Business and Professions Code section
7028, subdivision (h) that can be read to point to a contrary
conclusion. The Enrolled Bill Report cited by the majority,
for instance, states: “This bill . . . defines people who use
unlicensed contractors, knowingly or not, as victims in order
to allow these people to receive restitution for their losses
through the criminal courts rather than having to spend
their own time and money to file their own case in the civil
courts against the unlicensed contractor.” (Dept. of
Consumer Affairs, Enrolled Bill Rep. on Assem. Bill No. 370
(2009-2010 Reg. Sess.) June 29, 2009, p. 1.) The same report
also states: “This bill would also make gaining restitution
from an unlicensed contractor in criminal courts more
consistent with existing law regarding restitution in civil
courts.” (Id. at p. 4.)
2
question—I submit, the key question—unresolved: what is
the “loss” that is appropriately compensable by restitution?
Defendant argues the issue by repeatedly treating
Business and Professions Code section 7028, and the cross-
referenced provision of the Penal Code, as if they authorize
restitution for only “actual losses.” Of course, that
disregards the term the statutes actually use: “economic
loss(es).” (Bus. & Prof. Code, § 7028, subd. (h); Pen. Code,
§ 1202.4, subd. (f).) The distinction is important. A
reference to actual loss would more strongly suggest that, in
an unlicensed contracting case, the pertinent “loss” should
be calculated as the difference between the quality and value
of work performed by an unlicensed contractor as compared
to the quality and value of the work if it were done by a
contractor with a license.2 The references to economic loss
that appear in the statute, however, are best read as a
qualifier to distinguish monetary or financial losses (which
are compensable) from compensation for psychological or
other noneconomic harm (which, with exceptions, are not).
(Compare, e.g., Pen. Code, § 1202.4, subd. (f) [“[I]n every case
in which a victim has suffered economic loss as a result of
the defendant’s conduct, the court shall require that the
2 I do not believe this is a case of “stolen or damaged
property,” which would trigger the Penal Code section 1202.4
provision that limits restitution to “the replacement cost of
like property, or the actual cost of repairing the property
when repair is possible.” (Pen. Code, § 1202.4, subd.
(f)(3)(A).)
3
defendant make restitution to the victim or victims in an
amount established by court order, based on the amount of
loss claimed by the victim or victims or any other showing to
the court”] with Pen. Code, § 1202.4, subd. (f)(3)(F) [for
felony violations of Penal Code section 288, a court should
order restitution for “[n]oneconomic losses, including, but not
limited to, psychological harm”].)3
By using the malleable term “economic loss,” I believe
the statutes give trial courts significant discretion to
determine what in fact constitutes the “loss” in an
unlicensed contractor case. (People v. Giordano (2007) 42
Cal. 4th 644, 663 [trial courts have broad discretion to choose
a method for calculating the amount of restitution].) On a
strong enough record, likely necessitating expert testimony,
I believe a trial court could order restitution of nearly all (or
perhaps even all) payments made to a convicted unlicensed
contractor without transgressing the limits of that
discretion. We have no such record in this case, and that is
partly why I conclude the result reached by the appellate
division cannot stand. Having said that, I am nevertheless
of the view that the manner in which the trial court
3 I leave for another day the task of unraveling how
Penal Code section 1202.4 can authorize restitution for
“every determined economic loss incurred as the result of the
defendant’s criminal conduct, including, but not limited
to . . . [¶] . . . [¶] Noneconomic losses . . . .” (Pen. Code,
§ 1202.4, subd. (f)(3).)
4
calculated the restitution award here was an abuse of the
court’s discretion.
The trial court’s restitution award was partly founded
on the price of the contract victim Curto entered into with
defendant. Specifically, the court took the remaining
balance Curto had not paid on that contract ($7,851) and
subtracted that amount from the court’s estimate of what it
would cost to fix the house renovation defects attributable to
defendant’s work ($9,150). The court ruled the resulting
figure ($1,299) would be the restitution award.
The problem, of course, is the decision to use the
contract price in calculating the restitution owed. At the
time Curto agreed to the contract, she believed (based on
defendant’s misrepresentations) that he was a licensed
contractor. Had she known before entering into the contract
that defendant in fact had no license, there is no reason to
believe she would have agreed to pay such a high amount.
Indeed, there is good reason to conclude otherwise: in
addition to plain common sense, which tells us, for instance,
that a buyer will pay less for a chair built by IKEA than one
built by Charles and Ray Eames, Curto’s testimony during
the restitution hearing indicated she relied on the belief that
defendant was licensed in selecting him for the renovation
job. By treating the license-based contract price as a given,
rather than reducing it to account for defendant’s
subsequently discovered unlicensed status, the trial court
gave defendant a windfall—and failed to make Curto fully
whole. I would accordingly remand the matter to the trial
5
court to recalculate the restitution award consistent with the
views I have expressed.4
BAKER, J.
4 I agree with the majority that the appellate division
did not err in ordering Curto’s attorney fees to be included as
part of the restitution award. (See Rancho Mirage Country
Club Homeowners Assn. v. Hazelbaker (2016) 2 Cal.App.5th
252, 263-264.)
6