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Is homebuilder's contractual construction-defect pre-litigation procedure unenforceable due to its variance from statutory procedure, and unenforceable when used with subsequent home purchasers?

Homebuilder.jpgIn The McCaffrey Group, Inc. v. Superior Court (filed 3/24/14) F066080, the trial court denied homebuilder McCaffrey's "Motion to Compel ADR" brought in an action filed by real parties in interest who were the owners of 24 homes built by McCaffrey which allegedly contained construction defects. McCaffrey petitioned for writ of mandate to enforce provisions in the home purchase contracts that require the homeowners to submit their construction defect claims to non-adversarial pre-litigation procedures before proceeding with a lawsuit. The trial court had found the contract provisions unenforceable as being unconscionable. The Court of Appeal, Fifth Appellate District, granted the petition.

The appellate court opinion addressed the three categories of suing homeowners: (1) pre-2003 original purchasers, (2) post-2003 original purchasers, and (3) subsequent purchasers who bought an existing McCaffrey-built home from a third party. The distinction in the first two categories derives from the Legislature's passage of the so-called "Right to Repair Act," effective January 1, 2003, found at Civil Code sections 895 through 945. Prior to 2003, there was no statutory procedure; after 2003, the builder has the option of contracting for an alternative non-adversarial procedure in lieu of the statutory procedure. Those contracts that came after this date stated that McCaffrey opted for its own procedure; essentially the same procedure it used before that date.

In short, both statutory and contract procedures provide for the homeowner giving written notice of claimed defects; some written acknowledgment by builder, followed by inspection and the opportunity to propose repairs/compensation; a determination by the homeowner to accept the builder's proposal or have the dispute mediated. If still unresolved, litigation may then follow; the contract procedure has an additional judicial reference procedure.

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"Completed and accepted" doctrine absolves architect of liability for college theatre stairway fall.

College.jpgIn Neiman v. Leo A. Daly Company, (filed October 30, 2012) B234537, plaintiff fell on stairs at the theater of Santa Monica Community College. She claimed she sustained injuries due to poor lighting and improper marked stairs at the main stage. She sued defendant, the architect who designed the theater and observed its construction. Defendant moved for summary judgment, theorizing that once a contractor completes its work and the owner accepts it, the contractor is not liable to third parties as a result of a patent defect in the work. This is known as the "completed and accepted" doctrine. Plaintiff countered there was a triable issue of material fact as to whether the defect--lack of marking stripes on the stairs--was patent or latent. Also, she claimed the project was not completed. The trial court granted the motion dismissing the matter as against defendant architect, and the Court of Appeal, Second Appellate District, Division One, affirmed.

The negligence alleged here did not concern preparation of the plans and specifications for the building. Rather, plaintiff claimed defendant was negligent in failing to notify the owner school district and project general contractor that the contrast marks required by the state building code were never placed on the stairs. She does not dispute that the absence of the marks is "obvious and apparent;" rather the patent defect here was the patency of the danger, not merely the exterior visibility. She argues the danger here was not apparent.

It was undisputed the plans and specifications called for the stripes on the stairs; but any noncompliance did not mean the work was incomplete. The appellate court determined that the work in question was deemed completed by the school district approximately 2 years before plaintiff's fall, and in use long before this accident. There was no evidence that the school district did not have access to those plans and thus had accepted the building's condition as it was. There was no hidden or concealed defect, which is the general criterion for determining latency. Thus the appellate court concluded the alleged defect was patent as a matter of law, giving defendant a complete affirmative defense to the claim.

In my view, this opinion should not be construed as giving carte blanche to a contractor to ignore building codes and plans and specifications. There certainly can be other consequences for such failure. Rather, the policy behind the completed-and-accepted doctrine is that the risk of liability for injury to third parties, under proper circumstances of completion and acceptance, must pass from the contractor to the owner, except for hidden or concealed defects.

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General contractor not liable for workplace injury claim of employee of subcontractor premised on negligent coordination of various subs

contractor.jpgIn Brannan v. Lathrop Construction Associates, Inc. (filed May 21, 2012, certified for publication June 12, 2012) 2012 DJDAR 7743, plaintiff was working for a masonry subcontractor at a school site when he slipped on wet scaffolding and injured his back. He sued defendant, the general contractor, on the theory that defendant negligently sequenced and coordinated the various subs working on the project; in particular, that plaintiff slipped and fell due to the presence of the plastering subs scaffolding, dampened by the rain, interfering with the masonry work. Defendant moved for summary judgment. The Contra Costa Superior Court granted the motion, dismissing the case, based on the Privette-Toland doctrine (Privette v. Superior Court (1993) 5 Cal.App.4th 689), Toland v. Sunland Housing Group, Inc. (1998) 18 Cal.4th 253. On appeal, the Court of Appeal, First Appellate District, Division One, affirmed.

The undisputed facts established it was understood that the plastering work would be done first, and the plaster scaffold would be removed before the masonry work started. However the scaffold was left behind at the request of the framing sub who wished to use it; the masonry sub never requested it. The masonry foreman (Garcia) was to make sure the site was safe for the masonry workers; he had the authority to call of the workers, if he saw something unsafe. Garcia observed on the date of the accident that it was raining, but had no safety concern about the wetness or the presence of the scaffolding (he had asked defendant when the scaffold would be removed.) Plaintiff was trying to cross over the scaffold to lay masonry in the area underneath when he stepped onto the second rung of the scaffold believing there was no other way to gain access. He slipped and fell, causing his injury.

The appellate court summarized the Privette-Toland doctrine: that injured employees of independent contractors normally cannot sue the hirer because the employer is implicitly expected to ensure his employees safety and workers' compensation was available should the employee be injured. The exception is found in Hooker v. Department of Transportation (2002) 27 Cal.4th 198: the hirer may be held responsible if it retained control of the work but negligently exercised its control. But merely retaining control over safety conditions is not enough; the hirer must have affirmatively contributed to the employee's injury.

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Contractor Licensing Law revisited: triable issue whether contracting entity and licensed entity are one and the same

Since the California Legislature amended Business & Professions Code section 7031, subdivision (e), to narrow the doctrine of substantial compliance with contractor licensing requirements, a contractor attempting to recover for construction work performed may no longer avoid the harshness of the bar against recovery by claiming lack of licensure was merely a matter of form. On this subject, I authored the case of Opp v. St Paul Fire & Marine Ins. Co. (2007) 154 Cal.App.4th 71. Opp involved an individual who was barred from utilizing his personal license because he was a different entity than the corporate entity that contracted to perform the work in question.

In this blog's June 27, 2011 edition, I discussed the contrasting facts of Ball v. Steadfast-BLK (2011) 196 Cal.App.4th 694. There, the trial court's judgment barring recovery was reversed because the business name listed in the contract was deemed one and the same as the individual sole proprietor operating the business, although the owners name appeared nowhere in the business name; the business was not a legal entity licensable separate from its owner who was licensed.

Montgomery Sansome LP v. Rezai (filed March 28, 2012) 2012 DJDAR 4042 presents yet another variant on this issue. Defendants hired "Montgomery Sansome Ltd. Lp, 305 Adrian Road, Millbrae" to perform repairs at an apartment building they owned; the work orders had the quoted information printed on the work orders along with contractor's license # 741713. Defendants paid $65,000 on the contract prior to terminating it. Plaintiff claims a balance of about $203,000 is owed it.

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Factual issue of hirer's negligent exercise of retained control in form of affirmative contribution renders reversal of grant of summary judgment

February 23, 2012

gavel.jpgIn Tverberg v. Fillner Construction Inc. (filed January 26, 2012) 2012 DJDAR, general contractor Fillner (defendant) was expanding the fuel pump area of a gas station. Two items of work involved the construction of a canopy and the erection of concrete posts to prevent vehicles from colliding with the fuel dispensers. Plaintiff Tverberg was the independent contractor who was the foreperson of Perry, the subcontractor constructing the canopy. Another sub, Alexander, was erecting the concrete posts. Plaintiff asked defendant's lead person twice, once before the start of the canopy construction and once on the next day after that construction started, to cover the wholes that had been dug where the posts (unrelated to canopy construction) were going to be installed. On the first occasion, the response was no equipment was available that day to over the holes. On the second occasion, a tractor was used by defendant to flatten the dirt piled around the holes. Later on that second day, Tverberg injured himself when he fell into one of the holes while walking toward the canopy work area.

In Solano Superior Court, defendant was granted summary judgment on each of two claims of liability: (1) breach of nondelegable regulatory duty and (2) negligent exercise of retained control. The Court of Appeal, First Appellate District, Division Four, reversed.

The appellate court first notes that the California Supreme Court in SeaBright Ins. V. US Airways, Inc. (2011) 52 Cal.4th 590 determined that the first theory is not actionable because the duty is delegable. However, the second theory here, if factually in dispute, is actionable. The court finds that triable issues of fact remain on that theory and reversed the judgment accordingly.

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Condominium construction work excluded in liability insurance policy: looks can be deceiving

During my time on the trial court bench, I would often hear the following analogy argued concerning the concept of circumstantial evidence: "When I see a bird that walks like a duck and swims like a duck and quacks like a duck, I call that bird a duck." I doubt that poet James Whitcomb Riley, when he first coined this phrase in about 1884, could have imagined he was providing attorneys with trial argument material.

In California Traditions, Inc. v. Claremont Insurance Co. (filed June 21, 2011, certified for publication on July 11, 2011) 2011 DJDAR 10405, the project developed by plaintiff consisted of 146 separate residences with no shared walls, halls, roofs or plumbing or electrical lines. But to avoid minimum set-back requirements for non-condominium single family homes and to allow higher density, the project was developed, marketed and sold as condominiums. Plaintiff hired Ja-Con Systems to do the rough framing work. Ja-Con was insured under a comprehensive general liability policy issued by defendant. That policy provided an exclusion for work on condominium and townhouse projects. In a separate action homeowners sued for defective construction; plaintiff developer obtained a $2 million judgment on its indemnity cross complaint against Ja-Con and now seeks to satisfy that from the policy.

The San Diego Superior Court granted defendant's motion for summary judgment based on the undisputed fact that the condominium exclusion precluded recovery. Plaintiff had argued that Ja-Con had a reasonable expectation of coverage because the units gave the outward appearance of non-condominium detached homes.

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Contractor, licensed as individual, may recover for work performed even though he used varied business name

Construction.JPGBefore any reader gets too excited with this caption, be aware that the California Business & Professions Code section 7031, subdivision (a) bar of compensation for contract work done by anyone other than a person or entity stated in a state-registered license is unaffected by the recent case discussed below. As I wrote in Opp v. St. Paul Fire & Marine Ins. Co. (2007) 154 Cal.App.4th 71, 76, a contractor's taking liberty to use a name to contract with parties that is different from a state-registered name and then seek recovery under the contract "would be tantamount to permitting an individual to adopt a prohibited fictitious business name and then to sue on a contract, when such suit would be barred for any other unregistered business."

Nonetheless, in Ball v. Steadfast-BLK (filed June 14, 2011) 2011 DJDAR 8745, the Court of Appeal, Third Appellate District, concluded that plaintiff Ball was a licensed contractor and as such was able to perform contracting work under the name Clark Heating and Air Conditioning, as was stated on his license, even thought the work in question was contracted under the transposed name of "Clark Air Conditioning & Heating." In so concluding, the appellate court reversed the Sacramento Superior Court's sustaining defendant's demurrer without leave to amend plaintiff's cause of action for foreclosure on a mechanic's lien.

What makes the difference in the Ball case is that plaintiff Ball was the sole proprietor of the business who possessed the license and did nothing to mislead his customers that anyone other than himself was the contractor; that he, rather than some possibly shell corporation, would be responsible for the quality of the work. As the appellate court points out, "Contrary to Steadfast's assertion, such a ruling does not 'deprive the CSLB [Contractors State Licensing Board] from providing the transparency and accountability essential to the integrity of the licensing system.' "Where, as here, Ball was the licensee and contracting party, the public would be able to check licensing status."

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

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.

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Remodeling Construction Work Not Under California Statutory Exception for "Household Domestic Service" Concerning Employment Safety Requirements

February 21, 2011

In Cortez v. Abich ( filed January 24, 2011) 2011 DJDAR 1257, plaintiff was seriously injured while employed by an unlicensed contractor performing roof demolition, when he fell through a seemingly intact portion of the roof of homeowner defendants' property while he was clearing debris from the portion of the roof already demolished. Defendants moved for summary judgment contending no duty to warn plaintiff of the roof's condition, in part arguing the safety requirements of California Occupational Safety and Health Administration (Cal-OSHA) did not apply to the residential remodeling project. The trial court granted the motion determining as a matter of law that the defendant homeowners were not plaintiff's employers. The Court of Appeal affirmed, concluding that while defendants were plaintiff's employers, as a matter of law the home improvement project fell within Cal-OSHA's "household domestic service" exception. The California Supreme Court disagreed and reversed, finding the plain meaning of the statute (California Labor Code section 6303, subd. (b)) does not allow application of the exception to this situation.

The Supreme Court looked to legislative intent of the language of this statutory subdivision which defines "employment" as "the carrying on of any trade, enterprise, project, industry, business, occupation, or work, including all excavation, demolition, and construction work, or any process or operation in any way related thereto in which any person is engaged or permitted to work for hire, except household domestic service." The employer of a person so employed is required to provide a "safe" place of employment. Defendants contended a homeowner is broadly exempt whenever an employee performs services on the property for the homeowner's personal benefit and not for commercial purposes. The Supreme Court disagreed that the statute is so broadly worded or intended. It viewed household domestic service as relating to maintenance of a home which is different than the present case of home remodeling. So while noncommercial tree trimming falls within the scope of the household domestic service exception (See Fernandez v. Lawson (2003) 31 Cal.4th 31), this case concerns the demolition and rebuilding of a significant portion of the home.

Given some of the underlying assumptions in this case that isolate this issue of statutory interpretation, future construction accident cases present many possible permutations of the nature of work provided to a homeowner. We do know there is no broad exemption for the homeowner. But would a cleanup crew that dusts and vacuums a home immediately after a remodeling job is completed fall within the exception? Is merely painting a home a maintenance activity? What about changing of old light fixtures in a home? The list of possibilities goes on.