Gillotti v. Stewart (2017) 2017 WL 1488711 Rejects Liberty Mutual, Holding Once Again that the Right to Repair Act is the Exclusive Remedy for Construction Defect Claims
June 05, 2017 —
Richard H. Glucksman, Esq. & Chelsea L. Zwart, Esq. - Chapman Glucksman Dean Roeb & Barger BulletinBackground
In Gillotti v. Stewart (April 26, 2017) 2017 WL 1488711, which was ordered to be published on May 18, 2017, the defendant grading subcontractor added soil over tree roots to level the driveway on the plaintiff homeowner’s sloped lot. The homeowner sued the grading subcontractor under the California Right to Repair Act (Civil Code §§ 895, et seq.) claiming that the subcontractor’s work damaged the trees.
After the jury found the subcontractor was not negligent, the trial court entered judgment in favor of the subcontractor. The homeowner appealed, arguing that the trial court improperly construed the Right to Repair Act as barring a common law negligence theory against the subcontractor and erred in failing to follow Liberty Mutual Insurance Co. v. Brookfield Crystal Cove LLC (2013) 219 Cal.App.4th 98. The Third District Court of Appeal disagreed and affirmed the trial court’s judgment in favor of the subcontractor.
Impact
This is the second time the Third District Court of Appeal has held that Liberty Mutual (discussed below) was wrongly decided and held that the Right to Repair Act is the exclusive remedy for construction defect claims. The decision follows its holding in Elliott Homes, Inc. v. Superior Court (Hicks) (2016) 6 Cal.App.5th 333, in which the Court of Appeal held that the Right to Repair Act’s pre-litigation procedures apply when homeowners plead construction defect claims based on common law causes of action, as opposed to violations of the building standards set forth in the Right to Repair Act. Elliott is currently on hold at the California Supreme Court, pending the decision in McMillin Albany, LLC v. Superior Court (2015) 239 Cal.App.4th 1132, wherein Liberty Mutual was rejected for the first time by the Fifth District. CGDRB continues to follow developments regarding the much anticipated McMillin decision closely, as well as all related matters.
Discussion
The Right to Repair Act makes contractors and subcontractors not involved in home sales liable for construction defects only if the homeowner proves they negligently cause the violation in whole or part (Civil Code §§ 911(b), 936). As such, the trial court in Gillotti instructed the jury on negligence with respect to the grading subcontractor. The jury found that while the construction did violate some of the Right to Repair’s building standards alleged by the homeowner, the subcontractor was not negligent in anyway. After the jury verdict, the trial court found in favor of the grading subcontractor.
The homeowner moved for a judgment notwithstanding the verdict or a new trial on the grounds that the trial court improperly barred a common law negligence theory against the grading subcontractor. The trial court denied the motions on the grounds that “[t]he Right to Repair Act specifically provides that no other causes of action are allowed. See Civil Code § 943.” The trial court specifically noted that its decision conflicted with Liberty Mutual, in which the Fourth District Court of Appeal held that the Right to Repair Act does not eliminate common law rights and remedies where actual damage has occurred, stating that Liberty Mutual was wrongly decided and that the Liberty Mutual court was naïve in its assumptions regarding the legislative history of the Right to Repair Act.
In Gillotti, the Third District Court of Appeal stated that the Liberty Mutual court failed to analyze the language of Civil Code § 896, which “clearly and unequivocally expresses the legislative intent that the Act apply to all action seeking recovery of damages arising out of, or related to deficiencies in, residential construction, except as specifically set forth in the Act. The Act does not specifically except actions arising from actual damages. To the contrary, it authorizes recovery of damages, e.g., for ‘the reasonable cost of repairing and rectifying any damages resulting from the failure of the home to meet the standards....’ ([Civil Code] § 944).”
The Court also disagreed with Liberty Mutual’s view that because Civil Code §§ 931 and 943 acknowledge exceptions to the Right to Repair Act’s statutory remedies, the Act does not preclude common law claims for damages due to defects identified in the Act. The Court stated: “Neither list of exceptions, in section 943 or in section 931, includes common law causes of action such as negligence. If the Legislature had intended to make such a wide-ranging exception to the restrictive language of the first sentence of section 943, we would have expected it to do so expressly.”
Additionally, the Court of Appeal rejected the argument that Civil Code § 897 preserves a common law negligence claims for violation of standards not listed in Civil Code § 986. It explained that the section of Civil Code § 897, which provides, “The standards set forth in this chapter are intended to address every function or component of a structure,” expresses the legislative intent that the Right to Repair Act be all-encompassing. Anything inadvertently omitted is actionable under the Act if it causes damage. Any exceptions to the Act are made expressly through Civil Code §§ 931 and 934. The Court concluded in no uncertain terms that the Right to Repair Act precludes common law claims in cases for damages covered by the Act.
The homeowner further argued that she was not precluded from bringing a common law claim because a tree is not a “structure,” and therefore the alleged tree damage did not fall within the realm of the Right to Repair. The Court of Appeal also rejected this argument, holding that while the tree damage itself was not expressly covered, the act of adding soil to make the driveway level (which caused the damage) implicated the standards covered by the Right to Repair Act. The Court explained that since under the Act a “structure” includes “improvement located upon a lot or within a common area” (Civil Code § 895(a)), as the driveway was an improvement upon the lot, the claim was within the purview of the Right to Repair Act. As the soil, a component of the driveway, caused damage (to the trees), it was actionable under the Act.
Reprinted courtesy of
Richard H. Glucksman, Chapman Glucksman Dean Roeb & Barger and
Chelsea L. Zwart, Chapman Glucksman Dean Roeb & Barger
Mr. Glucksman may be contacted at rglucksman@cgdrblaw.com
Ms. Zwart may be contacted at czwart@cgdrblaw.com
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Real Estate & Construction News Roundup (1/10/24) – New Type of Nuclear Reactor, Big Money Surrounding Sports Stadiums, and Positivity from Fannie Mae’s Monthly Consumer Survey
February 05, 2024 —
Pillsbury's Construction & Real Estate Law Team - Gravel2Gavel Construction & Real Estate Law BlogIn our latest roundup, the commercial real estate market poses a risk to financial stability, New York City moves towards net-zero building emissions, workers at several Los Angeles area hotels tentatively agree to a new contract, and more!
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Pillsbury's Construction & Real Estate Law Team
Seller Cannot Compel Arbitration for Its Role in Construction Defect Case<
March 01, 2012 —
CDJ STAFFThe buyer of a leaky home in Venice, California cannot be compelled to arbitration with the seller in a construction defect lawsuit, according to a decision in Lindemann v. Hume, which was heard in the California Court of Appeals. Lindemann was the trustee of the Schlei Trust which bought the home and then sued the seller and the builder for construction defects.
The initial owner was the Hancock Park Trust, a real estate trust for Nicholas Cage. Richard Hume was the trustee. In 2002, Cage agreed to buy the home which was being built by the Lee Group. Cage transferred the agreement to the Hancock Park Trust. Hancock had Richard Nazarin, a general contractor, conduct a pre-closing walk through. They also engaged an inspector. Before escrow closed, the Lee Group agreed to provide a ten-year warranty “to remedy and repair any and all damage resulting from water infiltration, intrusion, or flooding due to the fact that the door on the second and third floors of the residence at the Property were not originally installed at least one-half inch (1/2”) to one inch (1”) above the adjacent outside patio tile/floor on each of the second and third floors.”
Cage moved in and experienced water intrusion and flooding. The Lee Group was unable to fix the problems. Hume listed the home for sale. The Kamienowiczs went as far as escrow before backing out of the purchase over concerns about water, after the seller’s agent disclosed “a problem with the drainage system that is currently being addressed by the Lee Group.”
The house was subsequently bought by the Schlei Trust. The purchase agreement included an arbitration clause which included an agreement that “any dispute or claim in Law or equity arising between them out of this Agreement or any resulting transaction, which is not settled through mediation, shall be decided by neutral, binding arbitration.” The warranty the Lee Group had given to Hancock was transferred to the Schlei trust and Mr. Schlei moved into the home in May 2003.
Lindemann enquired as to whether the work done would prevent future flooding. Nazarin sent Schlei a letter that said that measures had been taken “to prevent that situation from recurring.” In February, 2004, there was flooding and water intrusion. Lindemann filed a lawsuit against the Lee Group and then added the Hancock Park defendants.
The Hancock Park defendants invoked the arbitration clause, arguing that Lindemann’s claims “were only tangentially related to her construction defect causes of action against the Lee Group.” On June 9, 2010, the trial court rejected this claim, ruling that there was a possibility of conflicting rulings on common issues of law. “With respect to both the developer defendants and the seller defendants, the threshold issue is whether there was a problem with the construction of the property in the first instance. If there was no problem with the construction of the property, then there was nothing to fail to disclose.” Later in the ruling, the trial court noted that “the jury could find there was no construction defect on the property, while the arbitration finds there was a construction defect, the sellers knew about it, and the sellers failed to disclose it.” The appeals court noted that while Hancock Park had disclosed the drainage problems to the Kamienowiczs, no such disclosure was made to Sclei.
The appeals court described Hancock Park’s argument that there is no risk of inconsistent rulings as “without merit.” The appeals court said that the issue “is not whether inconsistent rulings are inevitable but whether they are possible if arbitration is ordered.” Further, the court noted that “the Hancock Park defendants and the Lee Group have filed cross-complaints for indemnification against each other, further increasing the risk of inconsistent rulings.”
The court found for Lindemann, awarding her costs.
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Water Bond Would Authorize $7.5 Billion for California Water Supply Infrastructure Projects
October 29, 2014 —
Garret Murai – California Construction Law BlogWhen California voters cast their votes on November 4, 2014 they will decide the fate of a $7.5 billion water bond proposal – Proposition 1 – which would authorize $7.12 billion in new general obligation bonds and reallocate $425 million in previously authorized but unissued bonds for water supply infrastructure projects.
Proposition 1 – The Water Quality, Supply and Infrastructure Improvement Act of 2014
If you live in California you know that the state is in the midst of its third straight year of drought.
And it’s no ordinary drought.
According to some, it’s the severest drought on record, as nearly the entire state experiences “severe” to “exceptional” drought conditions across its counties.
The California Water Resources Board has implemented emergency water conservation regulations including hefty fines for those who don’t comply and even Governor Brown has allowed the grounds of the State Capitol to go brown to underscore the severity of the situation.
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Garret Murai, Kronick Moskovitz Tiedemann & GirardMr. Murai may be contacted at
gmurai@kmtg.com
Fix for Settling Millennium Tower May Start This Fall
August 17, 2020 —
Nadine M. Post - Engineering News-RecordWith the lengthy and complex permitting and approval process complete and almost all the other details worked out, construction could begin in mid-November on the estimated $100-million shoring fix for the 645-ft-tall Millennium Tower in San Francisco. The perimeter pile upgrade for the 58-story residential condominium building, which has settled more than 17 in. toward the northwest since its completion in 2009, was originally expected to begin earlier this year.
Nadine M. Post, Engineering News-Record
Ms. Post may be contacted at postn@enr.com
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Insurance Policy to Protect Hawaii's Coral Reefs
December 26, 2022 —
Tred R. Eyerly - Insurance Law HawaiiThe New York Times recently reported on an insurance policy issued to the non-profit Nature Conservancy to protect coral reefs in Hawaii. Cihistopher Flavelle, Catrin Einhorn, In a First, Nonprofit Buys Insurance for Hawaii's Threatened Coral Reefs, N.Y. Times, Nov. 21, 2022.
If damaged by a storm, coral reefs need immediate attention if they are going to recover. The Nature Conservancy plans a four step process to save damaged reefs:
- Purchase a policy for all 400,000 acres of coral reefs surrounding the Hawaii island.
- If reefs are sufficiently damaged by a storm the policy will pay out within two weeks.
- The Nature Conservancy will ask the State of Hawaii, owner of the reefs, for a permit to repair the storm damage.
- Finally, if the state officials issue the permit, the insurance proceeds will pay teams of divers to repair the damage. Crews will have about six weeks before coral begins to die.
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Tred R. Eyerly, Damon Key Leong Kupchak HastertMr. Eyerly may be contacted at
te@hawaiilawyer.com
Understand and Define Key Substantive Contract Provisions
March 23, 2020 —
Phillip L. Sampson Jr. & Richard F. Whiteley, Construction ExecutiveThe following contract provisions should be clearly understood before undertaking any construction project commences.
Force Majeure
Often referred to as an “Act of God,” a force majeure is an event, typically beyond the parties’ control, that prevents performance under a contract. To determine if a contractor need a force majeure clause in its contract, it should ask whether there may be instances where events beyond the contractor’s control could impact its contractual performance? If so, it will want this clause.
Courts currently treat force majeure as an issue of contractual interpretation, focusing on the express language in the contract. Consequently, the scope and applicability of a force majeure clause depends on the contract’s terms. Using broad language in a force majeure clause may help protect against unforeseen events. But to the extent possible, parties should describe with particularity the circumstances intended to constitute a force majeure.
The law relating to force majeure also fairly consistently provides that parties cannot avoid contractual obligations because performance has become economically burdensome. Courts have refused to apply force majeure clauses where an event only affects profitability. Recent attempts to categorize tariffs on construction materials as a force majeure have failed. Unless a tariff or tax is specifically listed as a force majeure event, it is unlikely to constitute a force majeure because it only affects profitability.
Reprinted courtesy of
Phillip L. Sampson Jr. & Richard F. Whiteley, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.
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Tips for Contractors Who Want to Help Rebuild After the California Wildfires
November 02, 2017 —
Garret Murai - California Construction Law BlogI received a call from one of my contractor clients this past week to see what he could do to help those affected by California’s North Bay fires.
The North Bay fires are the deadliest and most destructive wildfires in California’s history. To date, the fires have claimed 42 lives, burned more than 200,000 acres of land, destroyed an estimated 8,400 structures and likely damaged tens of thousands more. By comparison, the state’s second most deadly wildfire, the Oakland Hills fire of 1991, claimed the lives of 25 people, burned 1,600 acres of land, and destroyed 2,900 structures. Rebuilding costs for the North Bay fires, according to the California Insurance Commissioner, are expected to top $1 billion.
For those with insurance, insurance experts say that the rebuilding process can take two years or more for those whose homes and businesses were destroyed. For those whose homes and businesses were fortunate enough only to be damaged, rebuilding efforts are already underway.
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Garret Murai, Wendel Rosen Black & Dean LLPMr. Murai may be contacted at
gmurai@wendel.com
