Filed 2/19/14
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION THREE
CYNTHIA BURCH, B248830
Petitioner, (Los Angeles County
Super. Ct. No. SC101002)
v.
THE SUPERIOR COURT OF
LOS ANGELES COUNTY,
Respondent;
PREMIER HOMES, LLC, et al.,
Real Parties in Interest.
ORIGINAL PROCEEDINGS in mandate. Gerald Rosenberg, Judge.
Petition granted.
Best Best & Krieger, Victor L. Wolf, Scott W. Ditfurth and Kevin J. Abbott for
Petitioner.
No appearance for Respondent.
Zimmerman & Kahanowitch and Brian F. Zimmerman for Real Parties in
Interest.
_______________________________________
Cynthia Burch challenges an order granting summary adjudication in favor of
Premier Homes, LLC (Premier Homes), Custom Home Builders, Inc. (Custom Home
Builders), Scott Warren, and Daniel Sahar in a construction defect action. The
defendants argued that the Right to Repair Act (Civ. Code, § 895 et seq.) provides the
exclusive remedy for a homeowner seeking damages for construction defects and
precludes common law causes of action for negligence and breach of implied warranty.
Custom Home Builders, Warren, and Sahar also argued that they owed Burch no duty of
care and that they could not be liable for breach of implied warranty because they were
not parties to any contract with her.
We hold that the Right to Repair Act does not provide the exclusive remedy for
a homeowner seeking damages for construction defects that have resulted in property
damage, as here. In addition, we also conclude that Custom Home Builders, Warren,
and Sahar failed to negate a duty of care owed to Burch as a prospective purchaser and
failed to negate an implied warranty in favor of Burch as a third party beneficiary of the
construction contract. We therefore conclude that the court erred by summarily
adjudicating the counts for negligence and breach of implied warranty in favor of the
defendants.
FACTUAL AND PROCEDURAL BACKGROUND
1. Factual Background
Custom Home Builders, a general contractor, built a single family residence in
Pacific Palisades area of Los Angeles pursuant to a written construction contract with
Premier Homes, the developer. The residence was not built specifically for Burch, but
2
instead was built to be marketed to the general public. After the construction was
completed and the home was put on the market, Burch purchased it from Premier
Homes pursuant to a written sales contract. Warren and Sahar are the principals and
owners of both Custom Home Builders and Premier Homes.
2. Complaint
Burch filed a complaint against Premier Homes, Custom Home Builders,
Warren, Sahar, and others in December 2008. She filed a third amended complaint in
August 2012. She alleged in her third amended complaint that the home suffered from
numerous construction defects. She also alleged that Premier Homes and Custom
Home Builders were the alter egos of the individual defendants. She alleged counts for
(1) breach of the sales contract; (2) negligence; (3) breach of implied warranty;
(4) unjust enrichment; (5) breach of contract/third party beneficiary; and other counts.
Burch alleged in her second count for negligence that the defendants breached
their duty of care in connection with the construction, resulting in deficient construction.
She specified several defects that allegedly have resulted in property damage. She
alleged in her third count for breach of implied warranty that Premier Homes contracted
with Custom Home Builders for the construction and that Custom Home Builders was
aware that a party such as Burch would purchase the property. She alleged that the
defendants impliedly represented to her, as a third party beneficiary, that they had used
reasonable skill and judgment in the construction and alleged that they breached such
implied warranty.
3
3. Summary Adjudication
Custom Home Builders, Warren, and Sahar jointly moved for summary judgment
or summary adjudication of several counts. Premier Homes also separately moved for
summary judgment or summary adjudication. The defendants argued that the Right to
Repair Act established a statutory action for violation of the standards set forth in the
act as the exclusive remedy for damages for construction defects and abrogated
common law claims for damages for construction defects.
Custom Home Builders, Warren, and Sahar also argued with respect to the
negligence count that they had no contractual or other relationship with Burch and owed
her no duty of care. They argued, with respect to the count for breach of implied
warranty, that they could not be liable for such a breach because they were not parties to
any contract with Burch. They also argued that an implied warranty could arise only in
connection with the sale of goods and that they did not enter into a sales contract with
Burch or sell her any goods and therefore could not be liable for breach of implied
warranty.
The trial court granted summary adjudication in favor of Custom Home Builders,
Warren, Sahar, and Premier Homes on the second count for negligence and third count
for breach of implied warranty, among other counts. At the hearing on the motions, the
court cited Civil Code sections 896 and 943 in support of its ruling. The court denied
summary adjudication of the fifth count for breach of contract/third party beneficiary,
stating in a minute order that there was “a triable issue whether Plaintiff is a third party
beneficiary of the contract between Premier Homes and Custom Home Builders.”
4
4. Petition for Writ of Mandate
Burch petitioned this court for a writ of mandate in May 2013 challenging only
the summary adjudication of the second and third counts. We issued an order to show
cause.
5. Fourth Amended Complaint
Meanwhile, Burch moved for leave to file a fourth amended complaint. The trial
court granted the motion, and Burch filed a fourth amended complaint in September
2013 adding a new tenth count for damages pursuant to the Right to Repair Act. She
alleges in the tenth count that the defendants breached their duty of care and caused
defects that violate the standards set forth in Civil Code section 896 or are otherwise
actionable pursuant to Civil Code section 897. She lists the same defects previously
alleged in the second count for negligence and realleged in the fourth amended
complaint in a negligence count against other defendants. She does not reallege the
counts for negligence and breach of implied warranty against the defendants who
successfully moved for summary adjudication of those counts.
CONTENTIONS
Burch contends (1) the Right to Repair Act does not provide the exclusive
remedy for damages for construction defects, and the trial court erred by summarily
adjudicating her counts for negligence and breach of implied warranty on this basis; and
(2) Custom Home Builders, Warren, and Sahar failed to negate the existence of a duty
of care and an implied warranty.
5
DISCUSSION
1. Standard of Review
“Summary adjudication of a cause of action is appropriate only if there is no
triable issue of material fact as to that cause of action and the moving party is entitled to
judgment on the cause of action as a matter of law. (Code Civ. Proc., § 437c,
subd. (f)(1).) A defendant moving for summary adjudication of a cause of action must
show that one or more elements of the plaintiff’s cause of action cannot be established
or that there is a complete defense. (Id., subd. (p)(2).) If the defendant makes that
initial showing, the burden then shifts to the plaintiff to show that a triable issue of
material fact exists. (Ibid.)
“We review the trial court’s ruling de novo, liberally construe the evidence in
favor of the party opposing the motion, and resolve all doubts concerning the evidence
in favor of the opposing party. (Miller v. Department of Corrections (2005) 36 Cal.4th
446, 460 [30 Cal.Rptr.3d 797, 115 P.3d 77].) We must affirm a summary adjudication
if it is correct on any ground that the parties have had an adequate opportunity to
address on appeal, regardless of the trial court’s stated reasons. (Johnson v. United
Cerebral Palsy/Spastic Children’s Foundation (2009) 173 Cal.App.4th 740, 754
[93 Cal.Rptr.3d 198]; Western Mutual Ins. Co. v. Yamamoto (1994) 29 Cal.App.4th
1474, 1481 [35 Cal.Rptr.2d 698]; see Gov. Code, § 68081; Code Civ. Proc., § 437c,
subd. (m)(2).)” (Bell v. H.F. Cox, Inc. (2012) 209 Cal.App.4th 62, 71.)
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2. Mootness/Waiver
Contrary to the defendants’ argument, Burch’s filing of a fourth amended
complaint after the trial court’s ruling did not render moot her challenge to the ruling.
Burch has shown no intention of abandoning her counts for negligence and breach of
implied warranty against the defendants and need not reallege those summarily
adjudicated counts in each amended complaint in order to avoid a waiver. (National
Union Fire Ins. Co. of Pittsburgh, PA v. Cambridge Integrated Services Group, Inc.
(2009) 171 Cal.App.4th 35, 44-45 [held that the plaintiff need not reallege in an
amended complaint a count to which a demurrer had been sustained without leave to
amend in order to challenge the ruling on appeal].)
3. The Right to Repair Act Does Not Preclude the Counts for Negligence
and Breach of Implied Warranty
The California Supreme Court in Aas v. Superior Court (2000) 24 Cal.4th 627,
647, 652-653 (Aas), held that deficiencies in residential construction were actionable in
tort only if they caused property damage or personal injury. The Legislature enacted the
Right to Repair Act in 2002 abrogating the holding in Aas by allowing the recovery of
damages for specified defects resulting in only economic loss. (Liberty Mutual Ins. Co.
v. Brookfield Crystal Cove LLC (2013) 219 Cal.App.4th 98, 103-104 (Liberty Mutual);
Greystone Homes, Inc. v. Midtec, Inc. (2008) 168 Cal.App.4th 1194, 1212.) The act
sets forth construction standards the violation of which constitutes a deficiency in
construction for which a “builder,” as defined in the act, and to some extent a general
contractor and others, can be held liable to a homeowner without the need to show
7
property damage or other injury. (Civ. Code, §§ 896, 897, 942.) The act also prescribes
a nonadversarial prelitigation procedure for the parties to follow in an attempt to resolve
the dispute, litigation procedures for claims under the act, and the measure of damages.
(Id., §§ 910-945.5.)
Civil Code section 896 states that in any action for damages arising out of or
related to deficiencies in residential construction, a builder’s liability, and to some
extent the liability of a general contractor and others, is limited to liability for violation
of the construction standards set forth in the Right to Repair Act, except as specifically
stated in the act. Civil Code section 944 prescribes the measure of damages for
violation of the standards set forth in the act. Civil Code section 943, subdivision (a)
states, “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 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 section 897 specifically excepts from the
limitation of liability under the act any defect that “causes damage.”1
Thus, the Right to Repair Act abrogates the holding in Aas, supra, 24 Cal.4th
627, by providing a remedy for particular residential construction defects that cause no
property damage. The act, however, does not limit or preclude common law claims for
1
“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.” (Civ.
Code, § 897.)
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damages for construction defects that have caused property damage. (Liberty Mutual,
supra, 219 Cal.App.4th at p. 108.) Liberty Mutual examined the act and its legislative
history and concluded that the act does not provide an exclusive remedy and does not
limit or preclude common law claims for damages for construction defects that have
caused property damage. (Id. at pp. 103-108.) We agree.
Burch alleged in her second count for negligence in her third amended complaint
that the defendants breached their duty of care resulting in deficient construction,
including but not limited to specified defects that caused property damage. She alleged
in her third count for breach of implied warranty that the defendants breached an
implied warranty with respect to the construction. Both counts allege common law
claims for damages for construction defects, including defects allegedly resulting in
property damage. We conclude that the Right to Repair Act does not preclude such
common law claims and that the summary adjudication of the second and third counts
on this basis was error.2
4. The Defendants Failed to Establish the Absence of a Duty of Care
Custom Home Builders, Warren, and Sahar also argued in their motion for
summary adjudication that they had no contractual or other relationship with Burch,
owed her no duty of care, and therefore could not be liable for either negligence or
breach of implied warranty. We first will address the negligence count.
2
The Right to Repair Act is expressly inapplicable to an action to enforce
a contract. (Civ. Code, § 943, subd. (a).) In light of our conclusion, we need not decide
whether an action for damages for breach of an implied warranty is an action to enforce
a contract within the meaning of the statute.
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The existence of a duty of care is an essential element of a negligence cause of
action. (Bily v. Arthur Young & Co. (1992) 3 Cal.4th 370, 397 (Bily).) Whether a duty
of care exists in a particular case is a question of law for the court to decide. (Ibid.)
The existence of a duty of care in the absence of privity of contract is a policy question
that depends on the balancing of several factors, including “[1] the extent to which the
transaction was intended to affect the plaintiff, [2] the foreseeability of harm to [the
plaintiff], [3] the degree of certainty that the plaintiff suffered injury, [4] the closeness
of the connection between the defendant’s conduct and the injury suffered, [5] the moral
blame attached to the defendant’s conduct, and [6] the policy of preventing future
harm.’ ” (Ibid., quoting Biakanja v. Irving (1958) 49 Cal.2d 647, 650 (Biakanja).)
Bily involved an action for professional negligence brought by investors against
an accounting firm that had prepared an independent audit of a client’s financial
statements. (Bily, supra, 3 Cal.4th at pp. 377-379.) Bily focused on “three central
concerns” with allowing “all merely foreseeable third party users of audit reports to sue
the auditor on a theory of professional negligence” (id. at p. 398): (1) the auditor could
face potential liability far out of proportion to its fault; (2) the class of plaintiffs in such
an action, generally more sophisticated business lenders and investors, could control
and adjust the risks by contract rather than rely on tort liability; and (3) potential
liability to third parties would more likely result in an increase in the cost and decrease
in the availability of audit services, rather than more careful audits. (Id. at pp. 398-406.)
In light of these considerations, Bily held that an auditor’s liability for negligence in
10
connection with performing an audit of a client’s financial statements is limited to the
client. (Id. at p. 406.)
Biakanja, supra, 49 Cal.2d 647, involved a negligence action against a notary
public who prepared a will in which the plaintiff was named as the sole beneficiary.
The will was denied probate because it lacked proper attestation. As a result, instead of
receiving the entire estate under the will, the plaintiff received only one-eighth of the
estate by intestate succession. (Id. at p. 648.) Applying the six factors listed above
(Biakanja factors), Biakanja stated that the defendant must have been aware that the
plaintiff would suffer a loss if the will were declared invalid, and the plaintiff would
have received the entire estate but for the defendant’s negligence. (Id. at pp. 650-651.)
The defendant clearly was not qualified to draft a will and supervise its execution, and
by doing so he had engaged in the unauthorized practice of law, a misdemeanor. (Id. at
p. 651.) Biakanja concluded that the defendant owed the plaintiff a duty of care despite
the lack of privity of contract. (Ibid.)
Stewart v. Cox (1961) 55 Cal.2d 857 applied the Biakanja factors in holding that
a concrete subcontractor was liable to homeowners for the negligent construction of
a swimming pool, despite the lack of privity of contract. (Id. at p. 863.) The plaintiffs
had settled with the general contractor who agreed to construct the pool for them. (Id. at
p. 860.) Stewart stated that the subcontractor’s work was intended to benefit the
plaintiffs as owners and that it was foreseeable that they would suffer property damage
if the pool was not sound. There was no doubt that the plaintiff suffered serious damage
caused by escaping water, and the trial court found based on ample evidence that the
11
injury resulted from the defendant’s negligence. (Id. at p. 863.) Stewart concluded that
the subcontractor “should not be exempted from liability if negligence on his part was
the proximate cause of the damage to plaintiffs.” (Ibid.)
Sabella v. Wisler (1963) 59 Cal.2d 21 held that a developer and contractor who
built a home for the purpose of offering it for sale to the public was liable to the
purchasers for negligent construction. (Id. at pp. 27-30.) The house was negligently
constructed on insufficiently compacted filled land. (Id. at pp. 23-24.) Applying the
Biakanja factors, Sabella stated that although the house was not built specifically for the
plaintiffs, they were members of the class of prospective homebuyers for which the
defendant built the house. (Sabella, supra, at p. 28.) “Thus as a matter of legal effect
the home may be considered to have been intended for the plaintiffs, and Wisler owed
them a duty of care in construction. [Citation.]” (Ibid.) The harm to prospective
homebuyers was foreseeable, it was undisputed that the house was seriously damaged,
and there was a close connection between the defendant’s negligence and the injury
suffered. (Ibid.) “Finally, the prevention of future negligent construction of buildings
upon insufficiently supportive material would not be furthered by exempting defendant
Wisler from liability for his negligence. [Citations.]” (Id. at p. 29.)
Custom Home Builders, Warren, and Sahar as the parties moving for summary
adjudication had the initial burden to present evidence showing that Burch could not
establish an element of her negligence count. In our view, the evidence presented in
support of their motion fails to show that Burch cannot establish a duty of care, and
instead tends to show that a duty of care existed. As in Sabella v. Wisler, supra,
12
59 Cal.2d at page 28, Burch is a member of a class of prospective homebuyers for
which the defendants performed the construction, so in legal effect the construction may
be considered to have been intended for her.3 It was foreseeable that a prospective
owner would suffer harm if the construction was deficient, and the defendants have
presented no evidence showing that the harm to Burch is uncertain. There is a close
causal connection between the defendants’ construction of the property as the general
contractor and any construction deficiencies and resulting damage. Finally, the policy
of preventing future harm from deficient construction would not be served if the general
contractor were excused from liability to the prospective owner for its alleged
negligence.4 (Sabella, supra, at pp. 28-29; Stewart v. Cox, supra, 55 Cal.2d at p. 863.)
Weseloh Family Ltd. Partnership v. K.L. Wessel Construction Co., Inc. (2004)
125 Cal.App.4th 152 (Weseloh), cited by the defendants, is distinguishable. That case
involved the construction of facilities for an automobile dealership. The defendants
were engineers who designed retaining walls for a subcontractor on the project and were
not otherwise involved in the construction. After the retaining walls failed, the owners
and the general contractor sued the design engineers for negligence. The trial court
granted summary judgment in favor of the design engineers. (Id. at pp. 158-160.)
3
Custom Home Builders, Warren, and Sahar did not challenge the alter ego
allegations in their motion for summary adjudication and have not shown that the
individual defendants should be regarded as any different from Custom Home Builders,
the general contractor on the project.
4
The evidence in the record does not suggest that the defendants’ conduct was
morally blameworthy apart any moral blame encompassed in the other factors.
13
Weseloh stated that the design engineers satisfied their initial burden on the summary
judgment motion to negate the existence of a duty of care by presenting evidence that
they had no contractual privity with either the owners or the general contractor and only
performed professional design services for a subcontractor. The burden on the motion
therefore shifted to the owners and the general contractor. (Id. at p. 164.)
Considering the Biakanja factors and the concerns cited in Bily, supra, 3 Cal.4th
at pages 398-406, Weseloh concluded that the design engineers owed no duty of care to
either the owners or the general contractor. (Weseloh, supra, 125 Cal.App.4th at
pp. 166-173). As in Bily, Weseloh noted the prospect of the design engineers’ liability
far out of proportion to their fault, the sophistication of the owners and the general
contractor and their ability to control and adjust the risks by contract rather than rely on
tort liability, and their failure to show any benefit from imposing liability to third parties
on a provider of professional services in those circumstances. (Weseloh, supra, at
pp. 170-172.) Weseloh stated that the owner could pursue a claim for damages against
the general contractor and the general contractor could pursue a claim for damages
against the subcontractor. (Id. at p. 170.) Weseloh also noted the absence of evidence
that the design engineers’ design was used without alteration and the absence of
evidence of causation in general. (Id. at pp. 168-169.)
Here, in contrast, Custom Home Builders was the general contractor on the
project responsible for the overall construction, rather than a provider of professional
services to a subcontractor, and the defendants have not challenged the element of
causation. The concerns cited in Bily, supra, 3 Cal.4th at pages 398-406, do not apply
14
here. We therefore hold that Weseloh, supra, 125 Cal.App.4th 152, does not support the
absence of a duty of care in these circumstances.
Our consideration of the Biakanja factors causes us to conclude that the
defendants failed to establish the absence of a duty of care. Instead, the evidence in the
present record supports the existence of a duty of care. The summary adjudication of
the negligence count in favor of Custom Home Builders, Warren, and Sahar cannot be
upheld based on the absence of a duty of care.
5. The Defendants Failed to Negate a Breach of Implied Warranty
Burch alleged in her third amended complaint that she was a third party
beneficiary of the construction contract between Premier Homes and Custom Home
Builders and that the defendants impliedly represented that Custom Home Builders used
reasonable skill and judgment in the construction.
Pollard v. Saxe & Yolles Dev. Co. (1974) 12 Cal.3d 374, 376, 379-380 (Pollard),
held that there is implied in a sales contract for newly constructed real property
a warranty of quality and fitness. Pollard stated, “the builder or seller of new
construction—not unlike the manufacturer or merchandiser of personalty—makes
implied representations, ordinarily indispensable to the sale, that the builder has used
reasonable skill and judgment in constructing the building.” (Id. at p. 379.) Pollard
stated further, “we conclude builders and sellers of new construction should be held to
what is impliedly represented—that the completed structure was designed and
constructed in a reasonably workmanlike manner.” (Id. at p. 380.) Pollard noted that
a similar implied warranty in construction contracts protects the owner from defective
15
construction and stated, “it would be anomalous to imply a warranty of quality when
construction is pursuant to a contract with the owner—but fail to recognize a similar
warranty when the sale follows completion of construction.” (Id. at pp. 378-379.)
The plaintiffs in Pollard, supra, 12 Cal.3d 374, purchased the property from the
defendant developers and were not parties to the construction contracts between the
developers and a general contractor, who was not a party to the litigation. (Id. at
p. 376.) Pollard held that the developers, as sellers of newly constructed real property,
could be held liable for breach of an implied warranty of quality and fitness, but that the
action was barred because the plaintiffs failed to notify the defendants of the defects
within a reasonable period of time after discovering the defects. (Id. at p. 380.)
Although Pollard stated that an implied warranty of quality and fitness applies to
builders and sellers of new construction, the case involved only the developers as
sellers. Pollard therefore did not suggest that an implied warranty ran from the general
contractor to the plaintiffs, with whom the general contractor had no contractual
relationship. East Hilton Drive Homeowners’ Assn. v Western Real Estate Exchange,
Inc. (1982) 136 Cal.App.3d 630, 632-633, cited by Burch, similarly involved sales by
the defendants to the plaintiffs, and did not suggest that an implied warranty could arise
absent privity of contract.
An implied warranty arises in a contract and therefore generally cannot arise
without a contract between the plaintiff and the defendant. “The general rule is that
privity of contract is required in an action for breach of either express or implied
warranty and that there is no privity between the original seller and a subsequent
16
purchaser who is in no way a party to the original sale. [Citations.]” (Burr v. Sherwin
Williams Co. (1954) 42 Cal.2d 682, 695 [noting exceptions that are inapplicable here].)
“ ‘It is settled law in California that privity between the parties is a necessary element to
recovery on a breach of an implied warranty of fitness for the buyer’s use, with
exceptions not applicable here. [Citation.]’ [Citation.]” (Huang v. Garner (1984)
157 Cal.App.3d 404, 419, disapproved on another ground in Aas supra, 24 Cal.4th at
p. 649.)
Gilbert Financial Corp. v. Steelform Contracting Co. (1978) 82 Cal.App.3d 65
held that a real property owner could maintain a cause of action against a subcontractor
for breach of an implied warranty of quality and fitness despite the lack of a contract
between the owner and the subcontractor. Gilbert concluded that, in the circumstances
of that case, the owner was an intended beneficiary of the contract between the general
contractor and the subcontractor. (Id. at pp. 69-70.) Gilbert recognized an exception to
the general rule that an implied warranty can arise only in favor of a party to the
contract.
The trial court here granted summary adjudication in favor of the defendants on
the second count for negligence and third count for breach of implied warranty based on
the Right to Repair Act. The court did not conclude that Burch was not an intended
beneficiary of the construction contract and summarily adjudicate the third count for
breach of implied warranty on that basis. Instead, the court concluded that there was
a triable issue of fact as to whether Burch was an intended beneficiary of the
construction contract, and therefore denied summary adjudication of the fifth count for
17
breach of contract/third party beneficiary. The defendants do not challenge the court’s
determination that a triable issue of fact exists, have shown no error in that
determination, and therefore are not entitled to summary adjudication of the third count
for breach of implied warranty.
DISPOSITION
The petition for writ of mandate is granted, and the trial court is directed to
vacate its order granting the motion for summary adjudication as to the second count for
negligence and third count for breach of implied warranty and enter a new order
denying the motion on those counts. The operative complaint shall be deemed amended
to include those two counts. Burch is entitled to recover her costs in these appellate
proceedings.
CERTIFIED FOR PUBLICATION
CROSKEY, J.
WE CONCUR:
KLEIN, P. J.
KITCHING, J.
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Burch v. Superior Court
Court: California Court of Appeal
Date filed: 2014-02-19
Citations: 223 Cal. App. 4th 1411
Copy CitationsCombined Opinion