In Templo Calvario Spanish Assembly of God v. Gardner Construction Corporation, the Court of Appeals held thatthe Contractors’ State License Law does not automatically void all contracts entered by unlicensed contractors, and thus an arbitrator’s ruling involving a contract dispute with a non-licensed contractor was valid.

In 2008, Templo and Gardner entered into a contract for Gardner to construct a church for Templo. After a dispute arose, the parties agreed to submit the matter to arbitration under the terms of an arbitration provision in the contract. Because Gardner was unlicensed, the arbitrator ruled that Gardner must disgorge the entire $160,213 Templo had paid to Gardner. Templo petitioned the superior court to confirm the arbitration award. Gardner followed with a petition to vacate the arbitration award. The trial court vacated the arbitration award, holding that because the contract was with an unlicensed contractor, it was illegal and void, and therefore so was the arbitration provision in the contract. Templo appealed, arguing that in the case of MW Erectors, Inc. v. Niederhauser Ornamental & Metal Works Co., Inc., 36 Cal.4^th 412 (2005), the California Supreme Court ruled that such contracts are not automatically illegal and void.  The Court of Appeals agreed and ordered the arbitration award be confirmed.

The Court of Appeals held that MW Erectors made clear that entering into a contract with a contractor who is later shown to be unlicensed at the time of execution of the contract does not automatically render the contract void.  It noted that if unlicensed at the time of performance, the law prohibits the contractor from filing suit to collect compensation for the performance of unlicensed work.  Applying that, the Court found no compelling need to conclude the law mandates that a consumer, Templo, cannot proceed to arbitrate its dispute with Gardner simply because the contractor was unlicensed at the time of signing the construction contract. As the arbitration clause was not part of an illegal or void contract, the arbitration was valid.

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