SOUTHERN CALIFORNIA CONSTRUCTION DEFECT LITIGATION ATTORNEY

California construction defect litigation is primarily governed by two statutory schemes:

The first is the Right to Repair Act (Cal. Civil Code, §§896 – 945.5), which came into effect on January 1, 2003. It is commonly referred by its legislative bill, SB 800. The Act defines what constitutes a construction defect in California by establishing “functionality standards,” the violation of which is actionable as a matter of law. The Right to Repair Act applies to original construction intended to be sold as an individual residence where the purchase agreement is signed on or after January 1, 2003.

The second statutory scheme, the Davis-Stirling Common Interest Development Act (California Civil Code, §§ 1375-1375.1), is commonly referred to as the “Calderon Procedures” and applies to common interest developments such as apartment complexes, condominiums or Homeowner’s Association claimants. These procedures typically require pre-filing dispute resolution processes between the homeowners associations and common interest development builders, such as general contractors, all subcontractors, as well as the design professionals, and insurers of all potentially liable parties.

There are various causes of action under Construction Defect Litigation. Each has their own sets of rules, so an experienced construction defect litigation attorney is usually advisable.

Under the strict liability doctrine, construction defect plaintiffs may recover damages without having to prove breach of duty. Rather, they need only show that a “mass-produced consumer item” is defective and that the “defect” proximately caused injuries. Del Mar Beach Club v. Imperial Contracting Co., (1981) 123 Cal.App.3d 898.

The Right to Repair Act sets forth about 45 functionality standards, a violation of each constitutes an actionable claim. The standards are divided into seven categories: (1) water intrusion issues, (2) structural issues, (3) soil issues, (4) fire protection issues, (5) plumbing and sewer issues, (6) electrical system issues, and (7) a catch-all category regarding other areas of construction. If the violation of a "standard" causes damage to a manufactured product, or if the manufactured product causes damage to other building components, those damages are recoverable under Cal. Civil Code § 896(g)(3)(D). Potential strict liability defendants in construction defect cases include builders of mass-produced homes, developers of building sites, manufacturers of component parts, material suppliers, and, in some circumstances, subcontractors.

Where an injury occurs due to negligent construction of a residence, a negligence cause of action may lie. Proof of negligence in the construction defect context requires that plaintiff demonstrate that the defendant fell below established professional standards or failed to meet building code requirements. As such, the standard of care required in the construction of a home must, in most cases, be established by expert testimony. Miller v. Los Angeles County Flood Control Dis. (1973) 8 Cal.3d 689, 703. 3 Revised 2012 In 2000, the California Supreme Court held that there could be no cause of action for negligence against a developer, contractor or subcontractor without some proof of consequential damage. Aas v. Superior Court (2000) 24 Cal.4th 627. Pursuant to Aas, a construction defect plaintiff could not sue a builder for a defect unless there had been actual bodily injury or damage to property.

The Right to Repair Act expressly superseded Aas by allowing claims where there is no resultant or consequential damage other than the defect itself. As discussed above, however, these causes of action are based on statutory strict liability.

A warranty is a contractual term concerning some aspect of the sale, such as title to the goods, or their quality or quantity. The warranty may be express or implied.

Contracts involving real property often contain warranties regarding conditions of the property. An express warranty is an affirmation of fact or promise made by the seller to a buyer that relates to the items sold and becomes part of the basis of the bargain. See Cal. Uniform Comm. Code § 2313. A seller’s obligation to a buyer for breach of warranty is one of strict liability. Basin Oil Co. v. Baash-Ross Tool Co., (1954) 125 Cal.App.2d 578, 596 (where a breach of warranty is established, liability is imposed entirely independent of the question of negligence on the part of the seller).

Implied warranties are based on implied representations rather than promises and may be created by statute or case law. California courts have long maintained that builder and seller of new construction are bound by an implied warranty that the completed structure was designed and constructed in a reasonably workmanlike manner. Windham At Carmel v. Mountain Ranch (2003) 109 Cal.App.4th 1162; see also Pollard v. Saxe & Yolles Dev’t. Co., (1974) 12 Cal.3d 374, 380. Because of the “new construction” component, it has been held that privity of contract must exist between the plaintiff and the original builder or seller before a cause of action for breach of implied warranty may be sustained.

However, stringent privity is not an express requirement for enforcement of the California Civil Code § 900 fit and finish warranty. Traditionally, the doctrine of implied warranty has not been applied to design professionals, i.e., architects and engineers.

The written purchase agreement of the sale of a home generally contains a number of provisions that may give rise to a breach of contract cause of action. A breach of contract action may also arise from breach of a design contract. Bayuk v. Edsun (1965) 236 Cal.App.2d 309.

As indicated above, causes of action for breach of express warranties are routinely asserted in construction defect litigation. In addition, contracts between developer, contractor and subcontractor may also give rise to breach of contract actions and, as explained below, form the basis for indemnity claims and cross-claims.

Breach of contract causes of action seeking redress for injury to real property have been recognized in California. In those cases the accrual of the breach of contract action is governed by the discovery rule. Angeles Chemical Co. v. Spencer & Jones (1996) 44 Cal.app.4th 112, 119- 4 Revised 2012 120 (the accrual of plaintiff’s cause of action is postponed until plaintiff either (1) actually discovers his injury and its negligent cause, or (2) could have discovered injury and cause through the exercise of reasonable diligence.) The statutes include a limitation of 4 years for breach of written agreement, 3 years for damage to real property, and 2 years for personal injury caused by breach of contract construction defect. Emotional distress damages are not recoverable under breach of contract theory where breach did not cause physical injury and the alleged emotional distress arose solely from property damage. Erlich v. Menendez (1999) 21 Cal.4th 543; see also Cal. Civil Code §§ 3300, 3301, 3333.

Intentional misrepresentation about construction defects and nondisclosure about such defects are actionable as damage claims. In California, the essential elements of a cause of action by intentional misrepresentation are: (1) the defendant made a representation as to a past or existing material fact, (2) the representation was false, (3) the defendant must have known that the representation was false when made (or must have made the representation recklessly without knowing whether it was true or false), (4) the defendant made the representation with an intent to defraud the plaintiff, (5) plaintiff was unaware of the falsity of the representation and must have acted in reliance therein, and (6) as a result of the reliance, plaintiff sustained damage. In the construction defect context, intentional misrepresentation has been successfully invoked against developers who file misleading information with the Department of Real Estate and those who sell property without disclosing known defects.

The California Supreme Court has described the general principles of indemnity as “the obligation resting on one party to make good a loss or damage another has incurred.” The right to seek indemnification may arise from two general sources: (1) by virtue of express contractual language establishing a duty in one party to save another harmless upon the occurrence of specified circumstances, and (2) in equitable considerations brought into play either by contractual language not specifically dealing with indemnification or by the equities of the particular case. Causes of action for indemnity and contribution are routinely alleged in construction defect litigation. Builders and contractors sued by homeowners for construction defect customarily cross-claim against subcontractors, seeking indemnity to the extent of their liability. Eichler, supra. The California Supreme Court ruled recently in Crawford v. Weather Shield Mfg. Inc. (2008) 44 Cal.4th 541 that parties to a construction contract may assign one party responsibility for the other’s legal defense when a third-party claim is made. The Crawford opinion stands for the proposition that a contractual duty to defend arises as soon as such claims are made and may continue until they have been resolved. 5 Revised 2012 Under a subcontract in which subcontractor agrees to “defend any suit or action” against the general contractor, founded upon any claim growing out of the execution of the subcontractor’s work, the subcontractor’s obligation is to provide a defense to a construction defect action against the general contractor as soon as the action is brought, regardless of any later determination that the subcontractor was not negligent. In short, the Crawford opinion made it clear that the subcontractor's duty to defend does not require a final determination of the issues.

The Right to Repair Act made significant reforms to the statutes of limitations. Prior to The Act, a homeowner had 10 years to sue for latent (hidden or unknown) defects and 4 years for patent (apparent by reasonable inspection) defects. Now, all claims must be brought within 10 years following “substantial completion” unless otherwise specified. There are shorter time frames for certain violations, i.e., 2 years for untreated wood posts, 4 years for plumbing and electrical systems, and 5 years for painting claims.

A builder can “opt-out” of the statutory process by putting a “non-adversarial” or “nonlitigation” clause in his/her contract. This clause must provide the equivalent or greater protection for the homeowner than what is set forth in The Act. These alternative procedures are binding even if they are not successful in resolving the dispute or if the results are not favorable to the builder. If the builder decides to put these alternative procedures in his/her sales contract, he/she must notify the homeowner at the time the contract is signed. If the builder opts out, he is not afforded the pre-litigation protections of The Act, even if his non-adversarial or nonlitigation clause is invalidated; there are no safe harbor provisions or guidelines for the opt out clause. Civil Code § 914.

The Right to Repair Act makes certain third-party “qualified” persons immune to liability. Certified inspectors, registered professionals, engineers, licensed general contractors or licensed architects who provide “independent quality review of the work of improvement” are immune, unless that person causes damage to the home due to negligence or willful misconduct. Additionally, Civil Code § 916(e) of the Act requires builders to give notice of inspection to those it intends to hold responsible for construction defect claims. It is crucial that builders comply with this section to preserve their defense and indemnity rights against subcontractors and insurers.