California Appellate Lawyer Blog

In 2002, hoping to reduce construction litigation and the impact on housing costs, the California Legislature enacted Civil Code sections 895-945.5 that included a nonadversarial prelitigation procedure requiring home purchasers, who believe their home may be defective, to give the builder notice of the claimed defects and an opportunity to investigate and repair the defects prior to the homeowner being allowed to bring a lawsuit. Section 914, subdivision (a), allows the builder to provide in the home purchase contract an alternative procedure to that provided by statute so long as the alternative procedure is "fair and enforceable."

In Anders v. Superior Court (filed February 7, 2011) 2011 DJDAR 2137, the homeowner petitioners, owners of 54 homes built by real party Meritage Homes, filed their lawsuit for alleged defects without exhausting the prelitigation procedure. Meritage moved in the trial court to require the procedure it had prescribed in its home sale contracts. The Stanislaus County trial court found the particular procedure set out in the contracts unconscionable and unenforceable; however the court found it appropriate to require the homeowners to comply with the statutory prelitigation procedures. The homeowners petitioned the California Court of Appeal, Fifth Appellate District, to be relieved of this prelitigation requirement claiming the unenforceability of the builder's contractual procedure exempted them from having to comply with the statutory procedure. The appellate court agreed with the homeowners, with the exception of two homeowners whose contractual provision contained an election to use the statutory procedure.

The Court of Appeal points to the plain language of the statute that stated the builder's election was binding regardless of the success or unenforceability of the builders own contractual provision; that the builder waives the statutory provision by so electing. The trial court tried to take a practical approach, in the appellate court's view, by thinking the statutory procedure "would not harm them (the homeowners) and might be beneficial." But the problem with that thought, as is correctly noted by the appellate court, is the statute absolutely precludes such recourse.

Continue reading "Home Construction Defect Case Prelitigation Procedure Under California Civil Code Section 914 Backfires on Homebuilder Drafting Its Own Contract Provision" »

The second recent ADR case on the meeting of minds concerns arbitration--that is, whether an arbitration will even happen. The Court of Appeal (4th District, Division 1) in Villa Vicenza Homeowners Association v. Nobel Court Development LLC (filed January 11, 2011) 2011 DJDAR 585 found "CC&R's are not an effective means of obtaining an agreement to arbitrate a homeowners association's construction defect claim against a developer." In short, the court reasoned that there may not be a valid agreement constituting a meeting of minds and legal consideration on the subject of waiver of judicial remedies. In the court's view, the legislature did not intend, in stating in California Civil Code section 1354 that Covenants, Conditions, & Restrictions (CC&R's) be treated as equitable servitudes, to provide continuing and irrevocable contractual benefits to the developer.

The Villa Vicenza decision follows a trend of cases that concern themselves with questions of fairness in terms of relative bargaining power in requiring contractual arbitration. There can be little doubt that a CC&R provision that sets forth an easement or limits the size of construction will be enforceable under normal circumstances against a homeowner who purchases a home from an existing homeowner, even though the new homeowner is outside of contractual privity with the original developer who recorded such CC&R's. The enforceability is a matter of notice of the equitable servitude as provided in Civil Code section 1354. The homeowners association in Villa Vicenza appears to be similarly on notice of the equitable servitude that any claims of defect against the developer are to be arbitrated. Those homeowners who constitute members of the homeowners association arguably had a choice in buying their homes and accepting the CC&R's as part of the bargain.

This brings me to a comparison of the two cases I have discussed. There of course is the obvious difference that Cassel is a Supreme Court case. Interestingly, literal interpretation of the statute in question there took precedence in serving the public policy favoring resolution of disputes by means short of litigation in a public court. The court refuses to rewrite the statute even to ensure accountability of attorneys. In Villa Vicenza, the appellate court appears to take considerable license in interpreting the provisions of Civil Code section 1354 to protect the public policy of not forcing parties into arbitration where they may not have knowingly agreed to forgo the public trial process, placing this policy above favoring ADR.

Had someone posed these two opinions to me without identifying which was from a higher court, I would have guessed the opposite.

Welcome to the inaugural posting of the California Appellate Lawyer Blog, presented by the Appellate Practice Group of Dowling Aaron Incorporated, Inc. This is Steve Vartabedian, recently retired from the bench, having spent 21 years on the California Court of Appeal which followed 8 years on the trial court. From time to time, I, and other attorneys at Dowling Aaron Incorporated, will be addressing matters such as recent appellate opinions, appellate practice, and trial practice issues aimed at protecting clients' appellate rights. I also participate in Dowling Aaron Incorporated's ADR Group, performing mediations and arbitrations. So I thought I would comment in my first two posts on two recent cases concerning ADR proceedings.

This first post is about mediation confidentiality and the California Supreme Court opinion in Cassel v. Superior Court (filed January 13, 2011) 2011 DJDAR 658. Evidently in this case, the mediation client felt that his attorney did not fairly achieve an agreement with the client in the settlement reached with the opposing party. The opinion does not tell us whether the settlement agreement was attacked in the trial court. We do know that client sued attorney for malpractice claiming counsel gave him bad advice, deceived and coerced him, and did so based on a conflict of interests. The client claimed he was induced into settle for a lower amount than the case was worth and lower than what client had communicated he was willing to accept.

The malpractice action reached the Supreme Court. In his defense at trial, attorney moved in limine to exclude ALL evidence of communications between him and client (plaintiff) that were related to the mediation, including pre-mediation discussions. The trial court granted the motion. On mandate petition, the Court of Appeal majority granted relief to plaintiff, finding that because defendant is free of his attorney-client privilege in defending the malpractice action, he cannot use mediation confidentiality as a shield in that action--that to do so would allow him to unfairly hamper the proof of malpractice against him.

Continue reading "Alternative Dispute Resolution (ADR): California Statutes, Public Policy, and Agreement --Part I: Mediation Confidentiality" »