Limiting Plaintiffs’ Claims to a Cause of Action for Violation of SB-800
November 18, 2011 —
Samir R. Patel, Esq., Lorber, Greenfield, & Polito, LLPThere has been a fair share of publicity about the SB-800 amendments to the Civil Code (Civil Code section 896, et seq.) that codified construction defect litigation in 2002. Most of the publicity is geared toward the pre-litigation standards allowing a builder the right to repair before litigation is commenced by a homeowner. Less focus and attention has been given to the fact that violation of the SB-800 performance standards is being used by plaintiff’s counsel as an additional tool in the plaintiff’s pleading tool box against builders. Closer scrutiny to SB-800 reveals that those provisions should in fact act as a limitation to the pleading tools available to plaintiffs and an additional tool for builders in the defense of cases governed by SB-800.
The typical construction defect complaint contains the boiler plate versions of numerous causes of action. These causes of action include Strict Liability, Negligence, Negligence Per Se, Breach of Contract, Breach of Contract – Third-Party Beneficiary, Breach of Express Warranties, Breach of Implied Warranties, among others. The wide array of causes of action leave a defendant “pinned to the wall” because they require a complex defense on a multitude of contract and tort related causes of action. Furthermore, the statutes of limitations as to these claims widely differ depending upon if the particular defect is considered latent or patent. The truth of the matter remains, no matter what the circumstances, if a construction defect matter ultimately goes to trial, it is inevitable that plaintiffs will obtain a judgment on at least one of these causes of action.
On its own, the Strict Liability cause of action can be a thorn in a defendant’s side. A builder is obviously placing a product into the stream of commerce and strict liability is a tough standard to defend against, particularly when it concerns intricate homes comprised of multiple components that originally sold for hundreds of thousands of dollars. A Negligence cause of action can also be difficult to defend because the duty of care for a builder is what a “reasonable” builder would have done under the circumstances. An interpretation of this duty of care can easily sway a jury that will almost always consist of sympathetic homeowners. A Negligence Per Se cause of action can also leave a defendant vulnerable to accusations that a builder violated the Uniform Building Code or a multitude of other obscure municipal construction-related code provisions during the construction of the home. Lastly, the Breach of Contract cause of action leaves a builder relying on dense and intricate purchase and sale agreements with dozens of addenda which leave the skeptical jurors turned off by what they view as one-side, boilerplate provisions. Ultimately, when a matter is about to go to trial, the complexity of these complaints can benefit a plaintiff and increase a plaintiff’s bargaining power against a defendant who is attempting to avoid a potentially large judgment.
Enter the SB-800 statutes. The SB-800 statutes apply to all homes sold after January 1, 2003. Civil Code section 938 specifically states that “[t]his title applies only to new residential units where the purchase agreements with the buyer was signed by the seller on or after January 1, 2003.” (Civil Code §, 938.) As time progresses, more residential construction defect cases will exclusively fall under the purview of SB-800. Slowly but surely more SB-800 governed litigation is being filed, and its exclusive application is looming on the horizon.
On its surface, this “right to repair” regime has left builders with a lot to be desired despite the fact that it is supposed to allow the builder the opportunity to cure any deficiencies in their product before litigation can be filed by potential plaintiffs. However, the application of the time line for repair has shown to be impractical for anything but the most minor problems involving only small numbers of residential units. Moreover, the fact that the fruits of the builder’s investigation into the claimed defects in the pre-litigation context can freely be used as evidence against it in litigation makes builders proceed with trepidation in responding with a repair. For these reasons, more SB-800 litigation can be expected to result due to the shortcomings of the pre-litigation procedures, and savvy defense counsel should anticipate the issues to be dealt with in presenting the defense of such cases at trial.
This fact should not necessarily be met with fear or disdain. Within the SB-800 statutes, the legislature made it clear that they were creating a new cause of action for construction defect claims, but it further made it clear that this cause of action is a plaintiff’s exclusive remedy. The legislature giveth, but at the same time, the legislature taketh away. Throughout numerous provisions within the SB-800 statutes, the Civil Code states that claims for construction defects as to residential construction are exclusively governed by the Civil Code, and that the Civil Code governs any and all litigation arising under breaches of these provisions. Civil Code section 896 specifically states:
In any action seeking recovery of damages arising out of, or related to deficiencies in, the residential construction … the claimant’s claims or causes of action shall be limited to violation of, the following standards, except as specifically set forth in this title. (Civil Code §, 896.)
Civil Code section 896 then provides approximately fifty-plus standards by which a construction defect claim is assessed under that provision. Civil Code section 896 covers everything from plumbing to windows, and from foundations to decks, and in several instances expressly dictates statutes of limitations as to specific areas of construction that severely truncate the 10-year latent damage limitations period. As for any construction deficiencies that are not enumerated within Civil Code section 896, Civil Code section 897 explicitly defines the intent of the standards and provides a method to assess deficiencies that are not addressed in Civil Code section 896. Civil Code section 897 states:
Intent of Standards
The standards set forth in this chapter are intended to address every function or component of a structure. To the extent that a function or component of a structure is not addressed by these standards, it shall be actionable if it causes damage. (Civil Code §, 897.)
Therefore, Civil Code section 897 acts as a catch-all by which defects that are not covered within Civil Code section 896 can be evaluated on a damage standard mirroring the Aas case (damages must be present and actual). The result of sections 896 and 897 being read in combination is a comprehensive, all-inclusive set of performance standards by which any defect raised by Plaintiffs can be evaluated and resolved under a single SB-800 based cause of action.
Civil Code section 943 makes clear that a cause of action for violation of SB-800 performance standards is a plaintiff’s sole remedy for a residential construction defect action. Specifically, Civil Code section 943 states:
Except as provided in this title, no other cause of action for a claim covered by this title or for damages recoverable under 944 is allowed. In addition to the rights under this title, this title does not apply to any action by a claimant to enforce a contract or express contractual provision, or any action for fraud, personal injury, or violation of a statute. (Civil Code §, 943.)
Civil Code section 944 provides the method for computing damages within a construction defect action, as follows:
If a claim for damages is made under this title, the homeowner is only entitled to damages for the reasonable value of repairing any violation of the standards set forth in this title, [and] the reasonable cost of repairing any damages caused by the repair efforts… . (Civil Code §, 944.)
A cursory review of these statutes yields the conclusion that the legislature was attempting to create an exclusive cause of action that trumps all other causes of action where SB-800 applies. The remedy available to plaintiffs is limited to that allowed by the Civil Code. As noted above, “[n]o other cause of action for a claim covered by this title…is allowed.” (Civil Code §, 943.) Therefore, Civil Code sections 896, 897, 943, and 944 specifically prohibit the contract-based and tort-based causes of action typically pled by plaintiffs.
Plaintiff’s counsel has seized upon the language of section 943 to advance the argument that SB-800 still allows a plaintiff to advance typical contract and tort based causes of action. On the surface, this argument may seem compelling, but a minimum of scrutiny of the express language of section 943 dispels this notion. Section 943 says that it provides rights “[i]n addition” to those under the SB-800 Civil Code provisions. Clearly, the language in section 943 is intended to expressly underscore the fact that a plaintiff is not precluded from seeking relief in addition to that allowed under SB-800 for damages not arising from a breach of the SB-800 standards or for damages in addition to those recoverable under Section 944. This language does not provide an unfettered license to bring a Strict Liability, Negligence or other cause of action against a builder where SB-800 applies.
In fact, this language only keeps the door open for plaintiffs to pursue such causes of action not arising from a breach of the SB-800 standards should there be such supporting allegations. For example, if a plaintiff alleges that a builder breached an “express contractual provision” related to the timing of the completion of the home and close of escrow, and the contract specifies damages in this regard, a plaintiff may have a viable separate cause of action for Breach of Contract for recovery of those damages precisely because that is not an issue expressly dealt with in SB-800 in the performance standards under sections 896 and 897, or in the damage recovery terms under 944. As it stands, the vast majority of complaints are seeking redress for violation of the same primary right; that is, defects specifically outlined in Section 896 and 897 or which result in damages as stated in Section 944.
So, how does a builder defend against a complaint that contains multiple causes of action regarding construction defects for a home sold after January 1, 2003? There are numerous ways to approach this. First and foremost, these superfluous and improper causes of action can be attacked by demurrer seeking dismissal of all causes of action other than the cause of action alleging violation of SB-800. If the the time period within which to file a demurrer has passed already, a motion for judgment on the pleadings can be utilized to attack the improper causes of action in the same way as a demurrer can be used for this purpose.
The limitation to a demurrer or motion for judgment on the pleadings is that the judge is restricted to viewing only the four corners of the pleading when making a ruling. It is typical for plaintiffs’ counsel to cleverly (or one might even say, disingenuously) leave the complaint purposely vague to avoid a successful defense attack on the pleadings by not including the original date the residence was sold. In that instance, a motion for summary adjudication can be used to attack a plaintiff’s complaint. By simply providing evidence that the homes were originally sold after January 1, 2003, the improper causes of action should be subject to dismissal by summary adjudication. If the plaintiff is a subsequent purchaser, the builder still has recourse to enforce the pleading limitations under SB-800. Civil Code section 945 states that “[t]he provisions, standards, rights, and obligations set forth in this title are binding upon all original purchasers and their successors-in-interest.” (Civil Code §, 945.)
Attacking a plaintiff’s complaint to eliminate multiple causes of action can have numerous benefits. The practical result is that a plaintiff will only have one viable cause of action. The advantage is that the SB-800 performance standards include the defined performance standards and shortened statutes of limitations periods with regard to specific issues. Furthermore, as to defects which are not specifically provided for in Civil Code section 896, Civil Code section 897 requires a proof of actual damages. Therefore, a plaintiff must provide evidence of current damages and not simply conditions that may potentially cause damage in the future.
The Appellate Courts have yet to directly address and interpret these SB-800 provisions. The time for that is undoubtedly drawing near. For now, however, plaintiffs will have to find ways to accurately plead construction defect claims within the confines of one cause of action for breach of the performance standards enumerated within the Civil Code.
Printed courtesy of Lorber, Greenfield & Polito, LLP. Mr. Patel can be contacted at spatel@lorberlaw.com and Mr. Verbick at tverbick@lorberlaw.com.
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Randy Okland Honored as 2019 Intermountain Legacy Award Winner
January 06, 2020 —
Jennifer Seward - Engineering News-RecordA passion for construction is in Randy Okland’s blood. His family’s business, Salt Lake City’s Okland Construction, was founded in 1918 by his grandfather, John Okland, a Norwegian immigrant and shipbuilder. Randy swept the floors and cleaned and fueled company vehicles while working as a laborer and later as a carpenter and concrete former. After graduating from the University of Utah, Randy worked full time at Okland, eventually taking over leadership of the company from his father in 1980.
Jennifer Seward, Engineering News-Record
ENR may be contacted at ENR.com@bnpmedia.com
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Scaffolding Purchase Suggests No New Building for Board of Equalization
July 30, 2014 —
Beverley BevenFlorez-CDJ STAFFEmployees at California’s Board of Equalization spoke out against the Brown administration after the state purchased new scaffolding for the defect-riddled building, rather than finding a new facility, reported the Sacramento Bee. The existing scaffolding was leased for $10,000 per month, but the lease expired, prompting the purchase of new scaffolding for about $100,000.
The board’s Chairman Jerome Horton stated “that while the change may make financial sense in the short term, it sends a signal that the Department of General Services intends to keep Equalization’s 2,200 or so employees in the troubled building,” according to the Sacramento Bee.
Building problems include “toxic mold, defective elevators, leaking windows, corroded wastewater pipes, floods, and exterior glass panels that spontaneously break or pop off.” So far, $2.3 million has been paid “in connection with building-related employee injury claims” along with $60 million in repairs. However, an additional $115 million is estimated to completely fix the defects.
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Ireland Said to Plan Home Loans Limits to Prevent Bubble
October 01, 2014 —
Joe Brennan – BloombergIreland’s central bank plans to impose limits for the first time on how much banks can lend home buyers as real estate values soar again in the home of western Europe’s worst property collapse, two people with knowledge of the matter said.
The regulator is preparing to publish a consultation paper on its proposals within weeks, said one of the people, who asked not to be named, as the matter is private. Banks and lobby groups will have a chance to comment on the plans, which center on introducing loan-to-value and loan-to-income restrictions. A spokesman for the central bank in Dublin declined to comment.
Irish homes prices are surging even as banks grapple with the aftermath of mortgage crisis that forced the government to bail out most of the nation’s lenders. A quarter of the country’s owner-occupier home loans are in arrears or had their terms eased. Loans granted during the boom for more than 85 percent of the property value were most likely to default in the wake of the crash, central bank economists said today.
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Joe Brennan, BloombergMr. Brennan may be contacted at
jbrennan29@bloomberg.net
Design Professional Needs a License to be Sued for Professional Negligence
January 13, 2017 —
David Adelstein - Florida Construction Legal Updates“With regard to claims for professional negligence, the Florida Supreme Court has explained that ‘where the negligent party is a professional, the law imposes a duty to perform the requested services in accordance with the standard of care used by similar professionals in the community under similar circumstances.’” Sunset Beach Investments, LLC v. Kimley-Horn and Associates, 42 Fla. L. Weekly D130a (Fla. 4th DCA 2017) quoting Moransais v. Heathman, 744 So.2d 973, 975-76 (Fla. 1999).
When it comes to professional negligence, two things are important:
1) the person being sued is a professional under the law (person has special education, training, experience, and skill) and
2) the standard of care for that professional (e.g, licensed, professional engineer).
In a recent case, an engineering intern—not, a licensed, professional engineer–was sued for professional negligence. The Fourth District Court of Appeal held that an engineering intern is not a person that can be sued for professional negligence, unlike a licensed, professional engineer. Sunset Beach Investments, supra.
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David Adelstein, Florida Construction Legal UpdatesMr. Adelstein may be contacted at
dadelstein@gmail.com
Duty to Defend Construction Defect Case Triggered by Complaint's Allegations
August 20, 2014 —
Tred R. Eyerly – Insurance Law HawaiiThe subcontractor's insurer could not escape contributing to defense costs of its insured when coverage was possible based upon the underlying complaint's allegations. Seneca Ins. Co. v. James River Ins. Co., 2014 U.S. Dist. LEXIS 97156 (D. Ore. July 17, 2014).
The underlying action alleged construction defects in a 60-unit complex located in Seaside, Oregon. S.D. Deacon Corp. was the general contractor and contracted with the owners association to reconstruct portions of the building, including the curtain wall. Deacon subcontracted with Superwall Design, LLP for work on the curtain wall renovation.
At some point not specified in the underlying complaint, the Association notified Deacon of construction defects in the curtain wall renovation. Deacon investigated and concluded that the alleged property damage was the result of inadequate usage of materials, violations of state and local building codes, and violations of relevant industry standards relating to the work performed by Superwall. Deacon contended that the problems were caused by Superwall's faulty workmanship.
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Tred R. Eyerly, Insurance Law HawaiiMr. Eyerly may be contacted at
te@hawaiilawyer.com
Owners and Contractors Beware: Pennsylvania (Significantly) Strengthens Contractor Payment Act
June 13, 2018 —
Wally Zimolong – Supplemental Conditions Yesterday, Governor Tom Wolf signed into law House Bill 566 which make major changes to Pennsylvania’s Contractor and Subcontractor Payment Act. Owners and General Contractors that fail to take head of the changes could face significant financial consequences.
The Pennsylvania Contractor and Subcontractor Payment Act, known as CAPSA or simply the Payment Act, was passed into law in 1994. The intent was “to cure abuses within the building industry involving payments due from owners to contractors, contractors to subcontractors, and subcontractors to other subcontractors.” Zimmerman v. Harrisburg Fudd I, L.P., 984 A.2d 497, 500 (Pa. Super. Ct. 2009). In reality, abuses still occurred. While the Payment Act purportedly dictated a statutory right to payment within a certain amount of time and imposes stiff penalties for failure make payment, including 1% interest per month, 1% penalty per month, and reasonable attorneys fees, the language of the Payment Act left recalcitrant contractors with wiggle room. Particularly, the Payment Act allowed owners and higher tier subcontractors to withhold payment “deficiency items according to the terms of the construction contract” provided it notified the contractor “of the deficiency item within seven calendar days of the date that the invoice is received.” 73 P.S. Section 506. The problem was that the Payment Act did not expressly state where the notice must be in written, what it must say, and what happened if notice was not given.
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Wally Zimolong, Zimolong LLCMr. Zimolong may be contacted at
wally@zimolonglaw.com
Residential Interior Decorator Was Entitled to Lien and Was Not Engaging in Unlicensed Contracting
August 04, 2021 —
David Adelstein - Florida Construction Legal UpdatesResidential construction disputes can sometimes take nasty turns. This is not attributed to one specific reason, but a variety of factors. Sometimes, there are not sophisticated contracts (or contracts at all). Sometimes, relationships and roles get blurred. Sometimes, parties try to skirt licensure requirements. Sometimes, a party is just unreasonable as to their expectations. And, sometimes, a party tries to leverage a construction lien to get what they want. In all disputes, a party would certainly be best suited to work with construction counsel that has experience navigating construction disputes.
An example of a construction dispute that took a nasty turn involving an interior decorator is SG 2901, LLC v. Complimenti, Inc., 2021 WL 2672295 (Fla. 3d DCA 2021). In this case, a condominium unit owner wanted to renovate his apartment. He hired an interior decorator to assist. As his renovation plans became more expansive, the interior decorator told him he would need to hire a licensed contractor and architect. The interior decorator arranged a meeting with those professionals and, at that meeting, they were hired by the owner and told to deal directly with the interior decorator, almost in an owner’s representative capacity since the owner traveled a lot. The interior decorator e-mailed the owner about status and requested certain authorizations, as one would expect an owner’s representative to do. At the completion of the renovation job, the owner did not pay the interior decorator because he was unhappy with certain renovations. The interior decorator recorded a construction lien and sued the owner which included a lien foreclosure claim. There was no discussion of the contracts in this case because, presumably, contracts were based on proposals, were bare-boned, or were oral.
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David Adelstein, Kirwin Norris, P.A.Mr. Adelstein may be contacted at
dma@kirwinnorris.com
