McMillin Albany LLC v. Superior Court of Kern Cnty. , 227 Cal. Rptr. 3d 191 ( 2018 )

Filed 1/18/18
IN THE SUPREME COURT OF CALIFORNIA
MCMILLIN ALBANY LLC et al., )
)
Petitioners, )
) S229762
v. )
) Ct.App. 5 F069370
THE SUPERIOR COURT OF KERN )
COUNTY, )
) Kern County Super. Ct.
Respondent; ) No. S-1500-CV-279141
)
CARL VAN TASSEL et al., )
)
Real Parties in Interest. )
____________________________________)
In Aas v. Superior Court (2000) 24 Cal. 4th 627, 632 (Aas), this court held
that the economic loss rule bars homeowners suing in negligence for construction
defects from recovering damages where there is no showing of actual property
damage or personal injury. We explained that requiring a showing of more than
economic loss was necessary to preserve the boundary between tort and contract
theories of recovery, and to prevent tort law from expanding contractual
warranties beyond what home builders had agreed to provide. (Id. at pp. 635–636;
see Seely v. White Motor Co. (1965) 63 Cal. 2d 9, 18.) We emphasized that the
Legislature was free to alter these limits on recovery and to add whatever
additional homeowner protections it deemed appropriate. (Aas, at pp. 650, 653.)
Two years later, spurred by Aas and by lobbying from homeowner and
construction interest groups, the Legislature passed comprehensive construction
defect litigation reform. (Stats. 2002, ch. 722, principally codified at Civ. Code,
§§ 895–945.5 (commonly known as the Right to Repair Act, hereafter the Act); all
further unlabeled statutory references are to the Civil Code.) The Act sets forth
detailed statewide standards that the components of a dwelling must satisfy. It
also establishes a prelitigation dispute resolution process that affords builders
notice of alleged construction defects and the opportunity to cure such defects,
while granting homeowners the right to sue for deficiencies even in the absence of
property damage or personal injury.
We are asked to decide whether the lawsuit here, a common law action
alleging construction defects resulting in both economic loss and property damage,
is subject to the Act’s prelitigation notice and cure procedures. The answer
depends on the extent to which the Act was intended to alter the common law —
specifically, whether it was designed only to abrogate Aas, supplementing
common law remedies with a statutory claim for purely economic loss, or to go
further and supplant the common law with new rules governing the method of
recovery in actions alleging property damage. Based on an examination of the text
and legislative history of the Act, we conclude the Legislature intended the
broader displacement. Although the Legislature preserved common law claims for
personal injury, it made the Act the virtually exclusive remedy not just for
economic loss but also for property damage arising from construction defects.
The present suit for property damage is therefore subject to the Act’s prelitigation
procedures, and the Court of Appeal was correct to order a stay until those
procedures have been followed.
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I.
Plaintiffs Carl and Sandra Van Tassel and several dozen other homeowners
(collectively the Van Tassels) purchased 37 new single-family homes from
developer and general contractor McMillin Albany LLC (McMillin) at various
times after January 2003. In 2013, the Van Tassels sued McMillin, alleging the
homes were defective in nearly every aspect of their construction, including the
foundations, plumbing, electrical systems, roofs, windows, floors, and chimneys.
The operative first amended complaint included common law claims for
negligence, strict product liability, breach of contract, and breach of warranty, and
a statutory claim for violation of the construction standards set forth in section
896. The complaint alleged the defects had caused property damage to the homes
and economic loss due to the cost of repairs and reduction in property values.
McMillin approached the Van Tassels seeking a stipulation to stay the
litigation so the parties could proceed through the informal process contemplated
by the Act. (§§ 910–938.) That process begins with written notice from the
homeowner to the builder of allegations that the builder’s construction falls short
of the standards prescribed by the Act. (§ 910.) The builder must acknowledge
receipt (§ 913) and thereafter has a right to inspect and test any alleged defect
(§ 916). Following any inspection and testing, the builder may offer to repair the
defect (§ 917) or pay compensation in lieu of a repair (§ 929). The Act regulates
the procedures for any repair, authorizes mediation, and preserves the
homeowner’s right to sue in the event the repair is unsatisfactory and no
settlement can be reached. (§§ 917–930.)
The Van Tassels elected not to stipulate to a stay and instead dismissed
their section 896 claim. McMillin moved for a court-ordered stay. (§ 930,
subd. (b) [“If the claimant does not conform with the requirements of this chapter,
the builder may bring a motion to stay any subsequent court action or other
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proceeding until the requirements of this chapter have been satisfied.”].) In
response, the Van Tassels argued that because the complaint now omitted any
claim under the Act, the Act’s informal prelitigation process did not apply. The
Van Tassels cited Liberty Mutual Ins. Co. v. Brookfield Crystal Cove LLC (2013)
219 Cal. App. 4th 98, 101 (Liberty Mutual), which held that the Act was adopted to
provide a remedy for construction defects causing only economic loss and did not
alter preexisting common law remedies in cases where actual property damage or
personal injuries resulted.
The trial court denied the motion for a stay. It observed that the issues
decided in Liberty Mutual might be the subject of further appellate inquiry, but
concluded it was bound to follow the case. Recognizing that the question was not
free from doubt, the trial court certified the issue as one worthy of immediate
review. (Code Civ. Proc., § 166.1.) McMillin sought writ relief.
The Court of Appeal granted the petition and issued the writ, disagreeing
with Liberty Mutual and another case that had followed it, Burch v. Superior
Court (2014) 223 Cal. App. 4th 1411. The court examined the text and history of
the Act and concluded that the Act was meant to at least partially supplant
common law remedies in cases where property damage had occurred. In the Court
of Appeal’s view, “the Legislature intended that all claims arising out of defects in
residential construction” involving post-2003 sales of new houses “be subject to
the standards and the requirements of the Act.” Accordingly, the Court of Appeal
held the Act’s prelitigation resolution process applied here even though the Van
Tassels had dismissed their statutory claim under the Act. The court concluded
that McMillin is entitled to a stay pending completion of the prelitigation process.
We granted review.
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II.
In deciding whether a statutory scheme alters or displaces the common law,
we begin with a presumption that the Legislature did not so intend. (Fahlen v.
Sutter Central Valley Hospitals (2014) 58 Cal. 4th 655, 669 (Fahlen); California
Assn. of Health Facilities v. Department of Health Services (1997) 16 Cal. 4th 284,
297 (Health Facilities).) To the extent possible, we construe statutory enactments
as consonant with existing common law and reconcile the two bodies of law.
(Verdugo v. Target Corp. (2014) 59 Cal. 4th 312, 326; People v. Ceja (2010) 49
Cal. 4th 1, 10.) Only “ ‘where there is no rational basis for harmonizing’ ” a
statute with the common law will we conclude that settled common law principles
must yield. (Health Facilities, at p. 297.)
Although the presumption against displacement of the common law is
strong, abrogation of the common law does not require an express declaration; it is
enough that “the language or evident purpose of the statute manifest a legislative
intent to repeal” a common law rule. (Health Facilities, supra, 16 Cal.4th at
p. 297; see Fahlen, supra, 58 Cal.4th at p. 669 [abrogation may be found “ ‘ “by
express declaration or by necessary implication” ’ ”].) In Martinez v. Combs
(2010) 49 Cal. 4th 35, for example, we canvassed the “full historical and statutory
context” surrounding enactment of statutory minimum wage protections and
concluded that it “show[ed] unmistakably” that the Legislature intended Industrial
Welfare Commission definitions of the employment relationship to control, even
when those definitions might depart from the common law. (Id. at p. 64; see
Verdugo v. Target Corp., supra, 59 Cal.4th at pp. 326–327 [giving other examples
where the Legislature clearly but implicitly abrogated the common law].)
As explained below, the statute here leaves the common law undisturbed in
some areas, expressly preserving actions for breach of contract, fraud, and
personal injury. (§ 943, subd. (a).) In other areas, however, the Legislature’s
5
intent to reshape the rules governing construction defect actions is patent. Where
common law principles had foreclosed recovery for defects in the absence of
property damage or personal injury (Aas, supra, 24 Cal.4th at p. 632), the Act
supplies a new statutory cause of action for purely economic loss (§§ 896–897,
942–944). And, of direct relevance here, even in some areas where the common
law had supplied a remedy for construction defects resulting in property damage
but not personal injury, the text and legislative history reflect a clear and
unequivocal intent to supplant common law negligence and strict product liability
actions with a statutory claim under the Act.
A.
We begin with the text of the Act, which “comprehensively revises the law
applicable to construction defect litigation for individual residential units” within
its coverage. (Lantzy v. Centex Homes (2003) 31 Cal. 4th 363, 382, fn. 16.) The
Act adds title 7 to division 2, part 2 of the Civil Code. (§§ 895–945.5.) That title
consists of five chapters. Chapter 1 establishes definitions applicable to the entire
title. (§ 895.) Chapter 2 defines standards for building construction. (§§ 896–
897.) Chapter 3 governs various builder obligations, including the warranties a
builder must provide. (§§ 900–907.) Chapter 4 creates a prelitigation dispute
resolution process. (§§ 910–938.) Chapter 5 describes the procedures for lawsuits
under the Act. (§§ 941–945.5.)
Section 896, which codifies a lengthy set of standards for the construction
of individual dwellings, begins with a preamble describing the intended effect of
those standards. As relevant here, the preamble says: “In any action seeking
recovery of damages arising out of, or related to deficiencies in, the residential
construction, design, specifications, surveying, planning, supervision, testing, or
observation of construction, a builder . . . shall, except as specifically set forth in
6
this title, be liable for, and 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. This title applies to original construction intended to be sold as an
individual dwelling unit. As to condominium conversions, this title does not apply
to or does not supersede any other statutory or common law.” (§ 896.)
Three aspects of this text are instructive. First, the provision applies to
“any action” seeking damages for a construction defect, not just any action under
the title. (§ 896.) This suggests an intent to create not merely a remedy for
construction defects but the remedy. Second, “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.” (Ibid.) This express language of limitation
means that a party seeking damages for a construction defect may sue for violation
of these standards, and only violation of these standards, unless the Act provides
an exception. This clause evinces a clear intent to displace, in whole or in part,
existing remedies for construction defects. Third, “[t]his title applies to original
construction intended to be sold as an individual dwelling unit,” but “[a]s to
condominium conversions, this title does not apply to or does not supersede any
other statutory or common law.” (Ibid.) The Act governs claims concerning
stand-alone homes; for such disputes, the Act’s provisions do “supersede any other
statutory or common law” except as elsewhere provided.
The Van Tassels argue that section 896 should be read to refer and apply
only to claims concerning defects that have yet to cause damage. But no such
limitation appears in the text, which says the Act applies to “any action seeking
recovery of damages arising out of” construction defects. (§ 896.) The Van
Tassels also object that if section 896 is read to apply broadly, the shorter
limitations periods it imposes for certain types of defects (e.g., § 896, subds. (e)–
(g)) may limit homeowners’ ability to recover. But there is nothing absurd about
7
accepting these limitations periods at face value, and they supply no special reason
to disregard the import of the remainder of the statute.
We turn next to chapter 5 (§§ 941–945.5), which contains key provisions
governing the damages recoverable in an action under the Act and the extent to
which the Act provides the exclusive vehicle for recovery of such damages. The
Legislature was well aware of the main categories of damages involved in
construction defect actions (economic loss, property loss, death or personal injury)
and their treatment under existing law. The major stakeholders on all sides of
construction defect litigation participated in developing the Act. (See Sen. Com.
on Judiciary, Analysis of Sen. Bill No. 800 (2001–2002 Reg. Sess.) as amended
Aug. 28, 2002, pp. 3, 8.) The Legislature also expressly considered Aas and its
rule requiring property damage or personal injury, not just economic loss, for any
tort suit alleging a construction defect. (Assem. Com. on Judiciary, Analysis of
Sen. Bill No. 800 (2001–2002 Reg. Sess.) as amended Aug. 26, 2002, pp. 2–3;
Sen. Com. on Judiciary, Analysis of Sen. Bill No. 800 (2001–2002 Reg. Sess.) as
amended Aug. 28, 2002, pp. 1–4.) Informed by the various stakeholders’
concerns, the Legislature enacted provisions that reflect a conscious effort to
address how and when various categories of damages would be recoverable going
forward.
The provisions of chapter 5 make explicit the intended avenues for
recouping economic losses, property damages, and personal injury damages.
Section 944 defines the universe of damages that are recoverable in an action
under the Act. (§ 944 [“If a claim for damages is made under this title, the
homeowner is only entitled to damages for” a series of specified types of losses].)
In turn, section 943 makes an action under the Act the exclusive means of
recovery for damages identified in section 944 absent an express exception:
“Except as provided in this title, no other cause of action for a claim covered by
8
this title or for damages recoverable under Section 944 is allowed.” (§ 943,
subd. (a).) In other words, section 944 identifies what damages may be recovered
in an action under the Act, and section 943 establishes that such damages may only
be recovered in an action under the Act, absent an express exception.
The list of recoverable damages in section 944 and the list of exceptions in
section 943 have different consequences for recovery of economic losses, personal
injury damages, and property damages:
Economic Loss. As noted, before the Act, tort recovery of purely economic
losses occasioned by construction defects was forbidden by this court’s decision in
Aas. (Aas, supra, 24 Cal.4th at p. 632.) Section 944 now specifies that various
forms of economic loss are recoverable in an action under the Act. (§ 944 [listing
among recoverable damages “the reasonable value of repairing any violation of
the standards set forth in this title, the reasonable cost of repairing any damages
caused by the repair efforts, . . . the reasonable cost of removing and replacing any
improper repair by the builder, reasonable relocation and storage expenses, lost
business income if the home was used as a principal place of a business licensed to
be operated from the home, [and] reasonable investigative costs for each
established violation . . . .”].) Consequently, a party suffering economic loss from
defective construction may now bring an action to recover these damages under
the Act without having to wait until the defect has caused property damage or
personal injury. Were there any doubt, section 942 makes clear that “[i]n order to
make a claim for violation of the” Act’s standards, “[n]o further showing of
causation or damages is required to meet the burden of proof regarding a violation
of a standard.”
Personal Injury. In contrast, personal injury damages are not listed as a
category recoverable under the Act. (§ 944.) This omission places personal injury
claims outside the scope of section 943, subdivision (a), which makes an action
9
under the Act the exclusive remedy for those damages listed in section 944. To
make the point even clearer, the Legislature also included personal injury claims
in a list of claims that are exempt from the exclusivity of the Act. (§§ 931 [listing
any action for “personal injuries” among the causes of action not covered by the
Act], 943, subd. (a) [“this title does not apply to . . . any action for . . . personal
injury . . .”].) Thus, common law tort claims for personal injury are preserved.
Property Damage. As with economic losses, the Act expressly includes
property damages resulting from construction defects among the categories of
damages recoverable under the Act. (§ 944 [a homeowner may recover “the
reasonable cost of repairing and rectifying any damages resulting from the failure
of the home to meet the standards”]; see § 896 [the Act applies to “recovery of
damages arising out of, or related to” construction defects].) This places claims
involving property damages within the purview of section 943, subdivision (a),
which makes a claim under the Act the exclusive way to recover such damages.
And unlike personal injury claims, negligence and strict liability claims for
property damages are not among the few types of claims expressly excepted from
section 943’s exclusivity. (§ 943, subd. (a); see § 931 [noting claims for personal
injury, but not property damage, fall outside the Act’s coverage].)
To sum up this portion of the statutory scheme: For economic losses, the
Legislature intended to supersede Aas and provide a statutory basis for recovery.
For personal injuries, the Legislature preserved the status quo, retaining the
common law as an avenue for recovery. And for property damage, the Legislature
replaced the common law methods of recovery with the new statutory scheme.
The Act, in effect, provides that construction defect claims not involving personal
injury will be treated the same procedurally going forward whether or not the
underlying defects gave rise to any property damage.
10
As with section 896, the Van Tassels argue that section 943, subdivision (a)
should be read to make the Act the exclusive remedy only for claims concerning
defects that have yet to cause damage. But this view cannot be reconciled with the
portion of section 943, subdivision (a) making the Act the exclusive means of
recovering any of the categories of damages listed in section 944 — categories
that, as noted, include resulting damages from construction defects, not just
economic loss. Moreover, if the only purpose of the Act’s creation of a statutory
claim was to abrogate the Aas rule for negligence claims and provide for recovery
of economic losses, the Act’s provisions would have had no effect on actions for
breach of contract, fraud, or personal injury. Had that been the limit of the
Legislature’s intent, the inclusion of an exception expressly preserving such
claims would have been unnecessary. (§ 943, subd. (a) [“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”].)
Section 897, which applies to elements of construction not otherwise
addressed in section 896, is also relevant. Although section 896 was intended to
be comprehensive, section 897 provides a supplemental standard for any building
components that section 896 may have overlooked: Any part not otherwise
covered is defective and “actionable if it causes damage.” This use of damage to
measure defectiveness is not unusual; many of the more specific standards in
section 896 likewise use the causation of damage as part of the test for whether a
given part is defective. (§ 896, subds. (a)(3), (6), (7), (9), (11), (12), (18), (c)(1).)
Thus, a claim under the Act, whether predicated on a violation of section 896 or
section 897, often may involve circumstances where an alleged defect has resulted
in property damage.
The Van Tassels read section 897 as providing that any defect covered by
that section can form the basis of a suit under the common law rather than under
11
the Act. Again, the statutory text and context do not support this reading. First,
when the Legislature intended to preserve common law claims as a complement to
claims under the Act, it did so expressly. (§§ 931, 943, subd. (a); see Gillotti v.
Stewart (2017) 11 Cal.App.5th 875, 894.) No similar language appears in section
897 to suggest violations of its catchall standard may be pursued in a common law
negligence or strict liability action outside the parameters of the Act. Second,
other parts of the Act treat sections 896 and 897 as a unified and connected whole.
(See §§ 910 [requiring exhaustion of prelitigation procedures in all cases where “a
violation of the standards set forth in Chapter 2 [§§ 896–897]” is alleged], 942
[establishing rules for “a claim for violation of the standards set forth in Chapter 2
[§§ 896–897]”].) Such treatment is at odds with the Van Tassels’ proposal that
section 897, unlike section 896, may be enforced at common law. Were we to
agree with the Van Tassels that a defect standard based on damage causation
reflects a legislative intent to preserve a common law claim for such defects, this
would create difficulties in applying section 896. That section measures
defectiveness for some but not all building components by whether damage was
caused and, under the Van Tassels’ reading, would support a common law claim
for some but not all standard violations. (Compare § 896, subds. (a)(3), (6), (7),
(11), (12), (18), (c)(1) [setting out standards for various components that depend
on damage] with id., subds. (a)(4), (14)–(17), (b)(1)–(4), (d)–(f) [setting out
standards for other components that do not depend on damage].) Had the
Legislature intended such a selective preservation of common law remedies, we
think it would have said so, as it did elsewhere.
Against these textual inferences, the Van Tassels point to other portions of
the Act that purportedly preserve common law claims and confine the Act’s
prelitigation procedures to statutory claims under the Act. (See §§ 910, 914,
subd. (a), 942.) Central to their argument is section 910, which says: “Prior to
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filing an action against any party alleged to have contributed to a violation of the
standards set forth in Chapter 2 (commencing with Section 896), the claimant shall
initiate the following prelitigation procedures . . . .” The Van Tassels contend that
this passage limits the applicability of the Act’s prelitigation procedures to cases
where the complaint formally “allege[s]” the defendant has “contributed to a
violation of the standards” set forth in the Act. A common law claim for property
damage that does not contain such formal allegations, they argue, is exempt from
the Act’s prelitigation procedures. But this reading of the statute is difficult to
reconcile with section 943, subdivision (a), which says: “Except as provided in
this title, no other cause of action for a claim covered by this title or for damages
recoverable under Section 944 is allowed.” In other words, section 943 disallows
claims other than those predicated on the Act’s standards, with exceptions not
applicable here. And if a claim for property damage alleges a violation of section
896 or section 897, then section 910 by its terms subjects the claim to the Act’s
prelitigation procedures.
Finally, the Van Tassels argue that the presumption against abrogation of
the common law requires an express statement that the Legislature intended to
displace existing remedies. It does not. (Ante, at p. 5.) Moreover, both sides
agree that the Legislature in passing the Act sought to abrogate the common law,
even though the text contains no express statement of that intent. They differ only
in degree: The Van Tassels contend that the Legislature sought only to overrule
the common law limits on recovery identified in Aas, whereas McMillin contends
that the Legislature went further in supplanting certain common law claims with
statutory ones. As explained above, we agree with McMillin’s reading of the Act.
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B.
The legislative history of the Act confirms that displacement of parts of the
existing remedial scheme was no accident, but rather a considered choice to
reform construction defect litigation.
First, language in the Legislature’s analyses of the Act’s effects reflects an
intent that the Act would govern not only no damage cases, but cases where
property damage had resulted. The Act’s standards were designed so that “except
where explicitly specified otherwise, liability would accrue under the standards
regardless of whether the violation of the standard had resulted in actual damage
or injury.” (Sen. Com. on Judiciary, Analysis of Sen. Bill No. 800 (2001–2002
Reg. Sess.) as amended Aug. 28, 2002, p. 4.) Both halves of this intended
application are significant: Liability under the standards would attach even in the
absence of actual damage, thus effectively abrogating Aas. And liability under the
standards would also attach in cases of actual damage; in other words, the
Legislature anticipated that passage of the Act would result in standards that
governed liability even when violation of the standards had resulted in property
damage. The Legislature thus recognized and intended that claims under the Act
would cover territory previously in the domain of the common law.
Second, the Act “establishes a mandatory process prior to the filing of a
construction defect action,” with the “major component of this process” being “the
builder’s absolute right to attempt a repair prior to a homeowner filing an action in
court.” (Sen. Com. on Judiciary, Analysis of Sen. Bill No. 800 (2001–2002 Reg.
Sess.) as amended Aug. 28, 2002, p. 5.) These purposes, the creation of a
mandatory prelitigation process and the granting of a right to repair, would be
thwarted if we were to read the Act to permit homeowners to continue to sue as
before at common law, without abiding by the procedural requirements of the Act,
for construction defect claims involving damages other than economic loss.
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Third, although there is no doubt that the Act had the intended effect of
overriding Aas’s limits on construction defect actions, that effect was treated in
both the Assembly and Senate as one consequence of the overall reform package,
not as the principal goal of the Act. The Assembly Committee on the Judiciary
described as a “principal feature of the bill” the establishment of construction
defect standards and then observed that one consequence of the “standards [is to]
effectively end the debate over the controversial decision in the Aas case.”
(Assem. Com. on Judiciary, Analysis of Sen. Bill No. 800 (2001–2002 Reg. Sess.)
as amended Aug. 26, 2002, p. 3; accord, Sen. Rules Com., Off. of Sen. Floor
Analyses, analysis of Sen. Bill No. 800 (2001–2002 Reg. Sess.) as amended Aug.
28, 2002, p. 3.) In a similar vein, the Senate Committee on the Judiciary described
the Act as creating standards that would “govern any action seeking recovery of
damages arising out of or related to construction defects” and then noted that “[i]n
addition” the rules for liability under the standards would “essentially overrule the
Aas decision and, for most defects, eliminate that decision’s holding that
construction defects must cause actual damage or injury prior to being actionable.”
(Sen. Com. on Judiciary, Analysis of Sen. Bill No. 800 (2001–2002 Reg. Sess.) as
amended Aug. 28, 2002, p. 4.) If the Van Tassels’ interpretation of the Act were
correct, then the legislative analyses certainly bury the lede.
In sum, the legislative history confirms what the statutory text reflects: the
Act was designed as a broad reform package that would substantially change
existing law by displacing some common law claims and substituting in their stead
a statutory cause of action with a mandatory prelitigation process.
III.
Echoing an argument made by the Court of Appeal in Liberty Mutual,
supra, 219 Cal. App. 4th 98, the Van Tassels contend that the detailed prelitigation
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procedures and timelines set out in chapter 4 (§§ 910–938) cannot rationally be
applied to defects that create a sudden loss requiring emergency repairs. From
this, they infer that the Act and its procedures were never intended to extend to
claims for defects resulting in actual damage. We are not presented with a case in
which any party had to take emergency action. But the emergency scenario does
not give us reason to doubt that the Act applies to property damage cases.
The Act requires a homeowner, before suing, to provide a builder with
written notice and a general description of an alleged construction defect. (§ 910,
subd. (a).) The Act then subjects the builder to a series of deadlines by which it
must acknowledge receipt, supply relevant records, and, if it chooses, inspect,
offer to repair the defect, and commence repairs. (§§ 912–913, 916–917, 921.) In
nonemergency cases, there is no tension between these provisions and the portions
of the Act that extend its application to cases involving property damage. In the
absence of delay risking a worsening of any damage, a homeowner will have time
to give the requisite notice and await the builder’s response. If the builder drags
its feet in a way that exacerbates damage, the Act protects the homeowner. (See
§ 944 [builder is liable for “the reasonable cost of repairing and rectifying any
damages resulting from the failure of the home to meet the standards”]; KB Home
Greater Los Angeles, Inc. v. Superior Court (2014) 223 Cal. App. 4th 1471, 1478
(KB Home) [“Since the builder is required to compensate the homeowner for
consequential damages, including the cost of repair of actual property damage
caused by a construction defect, any delay up to the statutory maximum risks
increasing the builder’s liability.”].)
Defects that trigger sudden ongoing, escalating damage present a more
difficult problem. The Act does not expressly address how its operation might
change in such unusual circumstances. The minimal requirements of formal
written notice and awaiting a builder response could be onerous in cases where a
16
construction failure creates a need for emergency action by a homeowner or the
homeowner’s insurer. But we need not read the notice requirement in isolation.
The Act also imposes on homeowners a general duty to act reasonably in order to
mitigate losses. (See § 945.5, subd. (b) [affording builders an affirmative defense
where losses are the result of “a homeowner’s unreasonable failure to minimize or
prevent those damages in a timely manner”].) A failure to give formal written
notice before taking any other action might well be excused in circumstances
where a homeowner has acted reasonably to mitigate losses and has provided
informal notice, and subsequent written notice, in a manner that is as timely and
effective as reasonably practicable under the circumstances. (See Lewis v.
Superior Court (1985) 175 Cal. App. 3d 366, 378 [construing statute of limitations
for filing of complaint to permit an exception “based upon impossibility where
catastrophic fire or earthquake or other events might render it physically
impossible” to comply]; cf. KB Home, supra, 223 Cal. App. 4th 1471 [notice
requirement not excused where homeowner alerted insurer, but not builder, and
insurer completed repairs three months later before finally notifying builder].)
A similar principle of reasonableness must be applied to the interpretation
of the builder’s rights and obligations. Although the Act establishes various
maximum time periods in which the builder may respond, inspect, offer to repair,
and commence repairs (§§ 913, 916–917, 921), the builder avails itself of the full
time allowed by the Act at its peril. The builder is liable for the damages its
construction defects cause, and even when a homeowner has acted unreasonably in
failing to limit losses, the builder remains liable for “damages due to the untimely
or inadequate response of a builder to the homeowner’s claim.” (§ 945.5,
subd. (b).) What constitutes a timely response will vary according to the
circumstances, and the maximum response periods set forth by the Act do not
necessarily insulate a builder from damages when the builder has failed to take
17
remedial action as promptly as is reasonable under the circumstances. The Act’s
liability provisions thus supply builders and homeowners clear incentives to move
quickly to minimize damages when alerted to emergencies. (KB Home, supra,
223 Cal.App.4th at p. 1478.)
The Van Tassels highlight section 930, subdivision (a), which requires
“[t]he time periods . . . in this chapter . . . to be strictly construed, . . . unless
extended by the mutual agreement of the parties.” But this directive simply
ensures that the time periods are followed when the parties have not agreed
otherwise. It does not mean that the parties are necessarily immune from liability
for failing to take swifter action when circumstances dictate.
Because this case does not involve a catastrophic occurrence or emergency
repairs, we need not decide definitively how the Act would apply on such facts.
But our review of the Act’s provisions reveals enough play in the joints to suggest
that the Act can be adapted well enough to extreme circumstances. The tension
between the Act’s timelines and the occasional need for expeditious action in
exigent circumstances does not provide a sufficiently compelling reason to
disregard the numerous indications in the Act’s text and history that the
Legislature clearly intended it to govern cases involving actual property damage.
We disapprove Liberty Mutual Ins. Co. v. Brookfield Crystal Cove LLC, supra,
219 Cal. App. 4th 98, and Burch v. Superior Court, supra, 223 Cal. App. 4th 1411,
to the extent they are inconsistent with the views expressed in this opinion.
IV.
The Van Tassels voluntarily dismissed without prejudice their cause of
action for violation of section 896’s standards. Even so, the operative complaint
includes claims resting on allegations that McMillin defectively constructed the
foundations, plumbing, roofs, electrical conduits, framing, flooring, and walls of
the plaintiffs’ homes. This suit remains an “action seeking recovery of damages
18
arising out of, or related to deficiencies in, the residential construction” of the
plaintiffs’ homes (§ 896), and McMillin’s liability under the Van Tassels’
negligence and strict liability claims depends on the extent to which it violated the
standards of sections 896 and 897. Thus, the Van Tassels were required to initiate
the prelitigation procedures provided for in the Act. (See Elliott Homes, Inc. v.
Superior Court (2016) 6 Cal.App.5th 333, 341 [“[W]here the complaint alleges
deficiencies in construction that constitute violations of the standards set out in
chapter 2 of the Act, the claims are subject to the Act, and the homeowner must
comply with the prelitigation procedure, regardless of the theory of liability
asserted in the complaint.”].)
In holding that claims seeking recovery for construction defect damages are
subject to the Act’s prelitigation procedures regardless of how they are pleaded,
we have no occasion to address the extent to which a party might rely upon
common law principles in pursuing liability under the Act. Nor does our holding
embrace claims such as those for breach of contract, fraud, or personal injury that
are expressly placed outside the reach of the Act’s exclusivity. (§ 943, subd. (a).)
That limit does not help the Van Tassels’ position here, for while the complaint
includes breach of contract and breach of warranty claims, it also includes claims
for strict liability and negligent failure to construct defect-free homes, to which no
statutory exception applies. Accordingly, the Van Tassels must comply with the
Act’s prelitigation procedures before their suit may proceed. Because the Van
Tassels have not yet done so, McMillin is entitled to a stay. (§ 930, subd. (b).)
19
CONCLUSION
We affirm the judgment of the Court of Appeal and remand for further
proceedings not inconsistent with this opinion.
LIU, J.
WE CONCUR:
CANTIL-SAKAUYE, C. J.
CHIN, J.
CORRIGAN, J.
CUÉLLAR, J.
KRUGER, J.
LUI, J.*
* Presiding Justice of the Court of Appeal, Second Appellate District, Division
Two, assigned by the Chief Justice pursuant to article VI, section 6 of the
California Constitution.
20
See last page for addresses and telephone numbers for counsel who argued in Supreme Court.
Name of Opinion McMillin Albany LLC v. Superior Court
__________________________________________________________________________________
Unpublished Opinion
Original Appeal
Original Proceeding
Review Granted XXX 239 Cal. App. 4th 1132
Rehearing Granted
__________________________________________________________________________________
Opinion No. S229762
Date Filed: January 18, 2018
__________________________________________________________________________________
Court: Superior
County: Kern
Judge: David R. Lampe
__________________________________________________________________________________
Counsel:
Borton Petrini, Calvin R. Stead and Andrew M. Morgan for Petitioners.
Ulich Ganion Balmuth Fisher & Feld and Donald W. Fisher as Amici Curiae on behalf of Petitioners.
Donahue Fitzgerald, Kathleen F. Carpenter, Amy R. Gowan; Ware Law and Dee A. Ware for California
Building Industry Association, Building Industry Legal Defense Foundation and California Infill
Federation as Amici Curiae on behalf of Petitioners.
Ryan & Lifter, Jill J. Lifter; Chapman, Glucksman Dean Roeb & Barger and Glenn T. Barger for
Association of Defense Counsel of Northern California and Nevada and Association of Southern California
Defense Counsel as Amici Curiae on behalf of Petitioners.
Hirsch Closson, Robert V. Closson and Jodi E. Lambert for California Professional Association of
Specialty Contractors as Amicus Curiae on behalf of Petitioners.
Newmeyer & Dillion, Alan H. Packer, J. Nathan Owens, Paul L. Tetzloff and Jeffrey R. Brower for
Leading Builders of America as Amicus Curiae on behalf of Petitioners.
Epstein Grinnell & Howell, Anne L. Rauch; Berding & Weil and Tyler P. Berding for Consumer Attorneys
of California as Amicus Curiae on behalf of Petitioners.
No appearance for Respondent.
Milstein Adelman, Milstein Adelman Jackson Fairchild & Wade, Mark A. Milstein, Fred M. Adelman and
Mayo L. Makarcyzk for Real Parties in Interest.
Benson Legal, Susan M. Benson; Williams | Palecek Law Group and Jason P. Williams for The National
Association of Subrogation Professionals as Amicus Curiae on behalf of Real Parties in Interest.
Page 2 – S229762 – counsel continued
Counsel:
Law Offices of Brian J. Ferber, Brian J. Ferber; Benedon & Serlin, Gerald M. Serlin and Wendy S. Albers
as Amici Curiae on behalf of Real Parties in Interest.
Horvitz & Levy, H. Thomas Watson and Daniel J. Gonzalez for MWI, Inc., as Amicus Curiae on behalf of
Real Parties in Interest.
Kasdan Lippsmith Weber Turner, Kenneth S. Kasdan, Michael D. Tuner, Bryan M. Zuetel and Derek J.
Scott as Amici Curiae on behalf of Real Parties in Interest.
Counsel who argued in Supreme Court (not intended for publication with opinion):
Andrew M. Morgan
Borton Petrini
5060 California Avenue, Suite 700
Bakersfield, CA 93309
(661) 322-3051
Mayo L. Makarcyzk
Milstein Adelman Jackson Fairchild & Wade
10250 Constellation Boulevard, Suite 1400
Los Angeles, CA 90067
(310) 396-9600
Wendy S. Albers
Benedon & Serlin
22708 Mariano Street
Woodland Hills, CA 91367
(818) 340-1950