Significant Victory for the Building Industry: Liberty Mutual is Rejected Once Again, This Time by the Third Appellate District in Holding SB800 is the Exclusive Remedy
December 15, 2016 —
Richard H. Glucksman & Ravi R. Mehta – Chapman Glucksman Dean Roeb & Barger Bulletin I. Elliott Homes, Inc. v. Superior Court (Certified for Publication, Cal. Ct. App. Dec. 2, 2016
The California Court of Appeal for the Third Appellate District recently elaborated on the scope of the Right to Repair Act, commonly known as SB-800 (“Act”). In
Elliott Homes, Inc. v. Superior Court of Sacramento County (Kevin Hicks, et al.) (certified for publication, Cal. Ct. App. Dec. 2, 2016), the Court considered whether the Act (and specifically the Act’s pre-litigation procedure) applies, when homeowners plead construction defect claims based only on common law causes of action, as opposed to violations of the building standards set forth in the Act (
Civil Code §896). The Court answered this question affirmatively.
The homeowners of seventeen (17) single-family homes filed a Complaint against the builder of their homes, Elliott Homes, Inc. (“Elliott”), alleging common law causes of action for construction defects. Elliott filed a motion to stay the litigation on the ground that the homeowners failed to comply with the pre-litigation procedure set forth in the Act. The trial court denied the motion, agreeing with the homeowners that this pre-litigation procedure did not apply because the homeowners had not alleged a statutory violation of the Act. Elliott appealed. The Court of Appeal purely considered the question of whether the Act, including its pre-litigation procedure, applies when a homeowner pleads construction defect claims based on common law causes of action, and not on statutory violations of the Act’s building standards.
To answer this question, the Court analyzed a recent case decided by the Court of Appeal for the Fourth Appellate District:
Liberty Mutual Ins. Co. v. Brookfield Crystal Cove, LLC (2013) 219 Cal.App.4th 98. In this subrogation case, a builder’s insurer asserted common law causes of action (but not statutory building standard violations) alleging construction defects against the builder to recover amounts paid to the homeowner after a sprinkler system failure caused extensive damage to the subject property. The trial court sustained the builder’s demurrer to the Complaint on the ground that it was time-barred under the Act. The Court of Appeal reversed the trial court’s order, holding that common law construction defect claims arising from actual damages are not covered by the Act because “the Act does not provide the exclusive remedy in cases where actual damage has occurred.” (
Liberty Mutual, 219 Cal.App.4th 98, 109).
The
Elliott Court declined to follow
Liberty Mutual, finding that that Court failed to properly analyze the language of the Act. The
Elliott Court analyzed both the statutory scheme and the legislative history of the Act to arrive at the conclusion that common law causes of action for construction defects do indeed fall within the purview of the Act.
According to the
Elliott Court, the Act “broadly applies to
any action seeking recovery of damages arising out of, or related to deficiencies in…residential construction and in such an action, a homeowner’s claims or causes of action shall be limited to violation of the standards set forth in the Act, except as specified.” Further, the Act expressly provides that “no other cause of action for a claim covered by this title or for damages recoverable under Section 944 is allowed.”
Civil Code §943(a). In turn,
Civil Code §944 allows for a recovery for the cost of repairing a building standard violation, or for the cost of repairing any damage caused by such a violation, among other things.
The limited exceptions to the Act’s applicability concern the enforcement of a contract, or any action for fraud, personal injury, or violation of a statute. Civil Code §943(a). Additionally, the Act does not apply to condominium conversions. Civil Code §896.
The Elliott Court explains that apart from these exceptions, the Legislature intended the Act to apply to all construction defect claims (regardless of damage) relating to the construction of residential properties whose sales contracts are signed after January 1, 2003. There is no exception in the Act, express or implied, for common law causes of action.
Next, the Court turns to the Act’s legislative history to buttress this conclusion. This history makes clear that the Act is a legislative response to the California Supreme Court’s holding in
Aas v. Superior Court (2000) 24 Cal.4th 627, that construction defects in residential properties are only actionable in tort when actual property damage manifests. Senate Judiciary Committee hearings indicate that the Act was the product of protracted negotiations between varying interested parties, including construction industry trade groups and consumer protection groups. The Legislature intended (1) to promulgate building standards, violations of which would be actionable, even without damage, and (2) to allow homeowners to recover for actual damage caused by construction defects not covered by the building standards. In other words, the Act was intended to provide homeowners redress regardless of whether damage had manifested.
Therefore, the Court concluded that common law causes of action for construction defects, regardless of damage, are subject to the pre-litigation procedure set forth in the Act. The Court issued a writ of mandate directing the trial court to vacate its earlier order, and to enter a new order granting Elliott’s motion to stay the litigation until the homeowners (and Elliott) have satisfied the pre-litigation procedure of the Act.
II. McMillin Albany, LLC v. Superior Court (2015) 239 Cal.App.4th 1132
Similar to the Third Appellate District Court’s ruling in
Elliott, the Fifth Appellate District Court also rejected the holding of
Liberty Mutual in a matter now pending before the California Supreme Court:
McMillin Albany, LLC v. Superior Court (2015) 239 Cal.App.4th 1132 (review granted and opinion superseded sub nom.
Albany v. Superior Court 360 P.3d 1022). Also similar to
Elliott, in
McMillin a group of homeowners filed common law construction defect claims against the builder of their homes. The builder,
McMillin, moved to stay the litigation pending compliance with the Act’s pre-litigation procedure. The trial court denied the motion, holding that the Act does not apply because the homeowners have not asserted statutory building standard violations contained within the Act.
In reasoning substantially similar to that of
Elliott, the
McMillin Court rejected Liberty Mutual’s holding that the Act is not the exclusive remedy for pursuing construction defect claims, with or without damage. Thus, the
McMillin Court issued a writ of mandate to vacate the trial court’s earlier order and to enter a new order granting McMillin’s motion to stay.
On November 24, 2015, the California Supreme Court granted the homeowners’ petition for review. In August of 2016, briefing was completed and the matter is now awaiting the scheduling of arguments. CGDRB will continue to closely monitor the pending appeal of this matter to the California Supreme Court, as well as all related developments.
Reprinted courtesy of
Richard H. Glucksman, Chapman Glucksman Dean Roeb & Barger and
Ravi R. Mehta, Chapman Glucksman Dean Roeb & Barger
Mr. Glucksman may be contacted at rglucksman@cgdrblaw.com
Mr. Mehta may be contacted at rmehta@cgdrblaw.com
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Brown Orders Mandatory Water Curbs for California Drought
April 01, 2015 —
Michael B. Marois – BloombergGovernor Jerry Brown ordered California’s first mandatory water restrictions as the drought gripping the state enters a fourth year.
Brown issued an executive order seeking a mandatory 25 percent reduction in use and a requirement that new homes feature water-efficient irrigation if the builder plans to use potable water for landscaping. He also called for 50 million square feet of lawns to be replaced with drought-tolerant landscaping and required campuses, golf courses and cemeteries to cut back on water.
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Michael B. Marois, BloombergMr. Marois may be contacted at
mmarois@bloomberg.net
Condominium Association Responsibility to Resolve Construction Defect Claims
July 23, 2014 —
Nicholas D. Cowie – Maryland Condo Construction Defect Law BlogThe Maryland Court of Special Appeals recently issued an opinion in Greenstein v. Council of Unit Owners of Avalon Court Six Condominium Inc. finding that an association can be sued by its unit owner members if it fails to take timely legal action against a developer. In that case, the association was aware of construction defects, but failed to take action to preserve its claim and then filed a lawsuit against the developer too late, after the statute of limitations expired. As a result, the suit against the developer was dismissed and the association was forced to assess its unit owner members for the $1 million in repair costs. Some of the unit owners then sued their association, seeking to recover the cost of their assessments on the ground that the association was negligent in failing to pursue a timely legal action against the developer.
On appeal, the court was asked to decide whether state law permits owners to sue their condominium association for negligently failing to sue a developer for common element construction defects. The court, in an unpublished opinion, found that an association could be held liable to its members. The court said: “The duty to maintain, repair and replace the common elements together with the exclusive right to initiate litigation regarding the common elements [which was stated in a provision of the association’s bylaws] creates a concomitant obligation on the part of the [association] to pursue recovery from [the developer] on behalf of [the unit owners] for damage to the common elements caused by [the developer’s] negligence, breach of contract or violation of any applicable law.”
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Nicholas D. Cowie, Maryland Condo Construction Defect Law BlogMr. Cowie may be contacted at
ndc@cowiemott.com
House Passes $25B Water Resources Development Bill
June 27, 2022 —
Tom Ichniowski - Engineering News-RecordA key federal infrastructure bill advanced with approval in the House of a measure providing $25.3 billion to help finance 22 Army Corps of Engineers storm and flood protection, ecological restoration, harbor dredging and other projects around the country.
Reprinted courtesy of
Tom Ichniowski, Engineering News-Record
Mr. Ichniowski may be contacted at ichniowskit@enr.com
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Why You May Not Want a Mandatory Mediation Clause in Your Construction Contract
October 26, 2017 —
Christopher G. Hill - Construction Law MusingsI know, you are likely surprised by the title of this post. You’ve read Construction Law Musings for a while now and know that as a Virginia Supreme Court certified mediator, I have advocated mediation as a great way to resolve your construction disputes short of the expensive and time consuming litigation process. Knowing all of this, you as a reader of this blog (thanks by the way) probably wonder why I think that a mandatory mediation clause may not be the best thing for your construction contracts. I can understand your possible confusion (particularly
in light of this post from @sethsmiley).
Please don’t take the headline as my suddenly taking a new view of mediation. Short of simply resolving the dispute between the parties to the construction contract, mediation still remains number one on my list of construction dispute resolution mechanisms. I still believe that it is useful even when a resolution is not met after a good faith attempt by both sides to come to a business agreement. However, I also believe that mediation works best when entered into voluntarily by the parties.
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Christopher G. Hill, The Law Office of Christopher G. HillMr. Hill may be contacted at
chrisghill@constructionlawva.com
Balfour Taps Qinetiq’s Quinn as new CEO to Revamp Builder
October 15, 2014 —
Benjamin Katz and Simon Thiel – BloombergBalfour Beatty Plc (BBY) named Leo Quinn as new chief executive officer to revamp Britain’s biggest builder which has suffered from mismanaged projects and a lack of demand.
Quinn will start on Jan. 1 after five years as CEO of defense specialist Qinetiq Group Plc, Balfour Beatty said today. The executive began his career at Balfour Beatty in 1979 as a civil engineer and later worked as president of Honeywell Building Controls and CEO of banknote printer De La Rue Plc. The stock gained 5.3 percent in London trading today.
Balfour Beatty, which rejected a merger proposal from British rival Carillion Plc in August, has struggled since the global recession slashed orders and prices. Its stock had fallen 48 percent this year before today, reducing the company’s value to 1 billion pounds ($1.6 billion). In September, Balfour Beatty cut its U.K. construction-services unit’s profit forecast and said Chairman Steve Marshall plans to leave.
Mr. Thiel may be contacted at sthiel1@bloomberg.net; Mr. Katz may be contacted at bkatz38@bloomberg.net
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Benjamin Katz and Simon Thiel, Bloomberg
Colorado Senate Voted to Kill One of Three Construction Defect Bills
May 05, 2014 —
Beverley BevenFlorez-CDJ STAFFThe Denver Business Journal reported that the Colorado Senate Appropriations Committee voted 5-2 to kill SB 219, one of the three construction defect bills introduced by Sen. Jessie Ulibarri, D-Commerce City. SB 219 “would have given the divisions of housing, insurance and law a combined $150,000 to collect data that would shine light on the reasons for the current shortage of owner-occupied affordable housing.”
However, the two other construction defect related bills are still alive. SB 216 “would offer financial incentives for building condos worth less than $500,000 and SB 220, would make it more difficult for condo owners to file a class-action lawsuit regarding alleged defects.”
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Does a Contractor (or Subcontractor) Have to Complete its Work to File a Mechanics Lien
January 10, 2018 —
Wally Zimolong - Zimolong LLCYes. There seems to be common misconception that a contractor, subcontractor, or supplier, has six months
from its last day of work on the project to file a mechanics lien. I frequently see mechanics liens whereby the claimant states “Claimants last day of work on the project was X.” However, Section 1502 (49 P.S. Section 1502) of the Pennsylvania Mechanics Lien is clear that a lien must be filed within six month of “the completion of his work.” Under the Lien Law, “completion of the work” is a defined term and means “means performance of the last of the labor or delivery of the last of the materials required by the terms of the claimant’s contract or agreement, whichever last occurs.”
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Wally Zimolong, Zimolong LLCMr. Zimolong may be contacted at
wally@zimolonglaw.com
