BFGC Architects Planners, Inc. v. Forcum/Mackey Construction, Inc.
119 Cal. App. 4th 848 (4th Dist. Jun. 21, 2004)

A school district contracted with an architect for construction of a high school and contracted with two general contractors for the same project. The District filed claims for breach of contract and professional negligence against the architect, who filed a cross-complaint against both general contractors. The architect sought equitable indemnity for the contractors’ alleged failure to perform work in a timely manner, thus delaying the project and causing the architect damages.

The trial court sustained the contractors’ demurrers without leave to amend and the Court of Appeal affirmed, finding that there is no basis for equitable indemnity where no action sounding in tort is alleged. The doctrine of equitable indemnity is “based on a duty owed to the underlying plaintiff.” Here, where designer’s allegations flowed only from contractors’ alleged breach of contract, the designer’s claims were “an improper attempt to recast a breach of contract cause of action as a tort claim.”

Bramalea California, Inc. v. Reliable Interiors, Inc.
119 Cal. App. 4th 468 (4th Dist. May 13, 2004)

Bramalea, a residential real estate developer, was sued by homeowners for construction defects. Bramalea could not recover attorneys’ fees incurred after it tendered its defense to subcontractors, but before it tendered its defense to subcontractors’ insurers, where fees were entirely paid by the insurers and Bramalea suffered no out-of-pocket loss. Bramalea could not recover under Code of Civil Procedure section 1032 because where the parties settled and admitted no liability, Bramalea was not a prevailing party. The collateral source rule did not apply because Bramalea’s causes of action were based entirely in contract, not tort.

Coldwell Banker Residential Brokerage Co., Inc. v. Superior Court (Salazar)
117 Cal. App. 4th 158 (4th Dist. Mar. 29, 2004)

Mother and son alleged they became ill from undisclosed toxic mold contamination in the mother’s recently purchased home. The minor son, who was not a party to the real estate transaction, brought various tort claims against the seller’s real estate broker. The Court of Appeal granted the broker’s demurrer without leave to amend, reversing the trial court’s decision that the son could state tort causes of action against the brokers. The Court of Appeal held that the inspection and disclosure duties of residential real estate brokers under Civil Code Section 2079 apply exclusively to prospective purchasers. Thus the son could not state tort claims against the brokers here because the brokers did not owe him a duty of care.

Gaggero v. County of San Diego
124 Cal. App. 4th 609 (4th Dist. Nov. 2, 2004)

Because County’s construction and operation of a landfill is an “improvement” within the meaning of the 10-year statute of repose provided by Code of Civil Procedure Section 337.15, subsequent owner’s action, brought more than 10 years after County sold the property and based on alleged defects in the design, construction, or operation of the landfill, was time-barred.

Hicks v. Superior Court (Kaufman and Broad Home Corporation)
previously published at 115 Cal. App. 4th 77 (2d Dist. January 22, 2004)
(review granted by California Supreme Court May 12, 2004)

Home buyers sought to recover the cost of repairing defective concrete foundations under their homes via claim for breach of implied warranty of quality against developer. The sales agreement, disclosure statement, and express warranty agreement signed by home buyers provided certain limited warranties and expressly stated that the home owner accepted the limited warranties in lieu of all other warranties, express or implied, including merchantability and fitness for a particular purpose. The Court of Appeal held this disclaimer precluded home owners’ claims for breach of implied warranty. The California Supreme Court has granted review.

Lewis Jorge Construction Management, Inc. v. Pomona Unified School District
34 Cal. 4th 960 (Dec. 23, 2004)

The Court of Appeal affirmed the trial court’s award of $3,148,197 for potential lost profits which contractor claimed it would have earned on future projects it never won because of its reduced bonding capacity resulting from developer’s allegedly unlawful termination of construction contract. The Supreme Court reversed, holding that potential lost profits were not available as general damages because such profits are not the “natural and necessary result of the breach of every construction contract involving bonding.” Further, the Court explained that because lost profits on future unawarded contracts were not reasonably foreseeable to District, such profits were unavailable as special damages.

Mesa Vista South Townhome Association v. California Portland Cement Company
previously published at 118 Cal. App. 4th 308 (4th Dist.May 4, 2004)
(review denied and opinion de-published Aug. 11, 2004)

A homeowners association, which was responsible for maintaining the concrete slabs and foundations at a condominium complex, brought a negligence claim, among others, against the supplier of allegedly defective concrete for the complex. Because of the severe sulfate content of the soils at the complex, concrete with a relatively low water-cement ratio was required. The concrete supplier furnished cement mixed with too much water thereby making it vulnerable to damage from sulfate attack.

The trial court found that the concrete itself had suffered submicroscopic damage from sulfate attack and that the concrete would disintegrate over time unless an intervention was made. The trial court concluded that the supplier was negligent in furnishing concrete with the improper design mix and awarded damages with respect to the deteriorating concrete.

Distinguishing Aas v. Superior Court, 24 Cal. 4th 627 (2000) (holding that the economic loss rule bars recovery for construction defects that have not caused appreciable harm), the Court of Appeal affirmed. The Court stressed that, unlike Aas, the existence of appreciable harm was clear in this case and that “continued degradation of the foundations” will possibly lead to “the loss of structural integrity.”

Applying the balancing test articulated in J’Aire Corp. v. Gregory, 24 Cal. 3d 799 (1979), the Court found that all six factors of the J’Aire balancing test were satisfied – most critically, the requirement of “certainty that the plaintiff suffered injury” – which weighed in favor of liability for negligence. The California Supreme Court recently de-published this decision, thereby reaffirming the Aas approach to the economic loss doctrine.

Shekhter v. Seneca Structural Design, Inc.
previously published at 121 Cal. App. 4th 1055 (2d Dist. Aug. 24, 2004)
(review denied and opinion de-published Nov. 17, 2004)

Where plaintiff owners of apartment complex sued design and construction companies alleging that defendants failed to properly design, engineer, and construct repairs to the complex after an earthquake, the trial court sustained demurrers to plaintiffs’ negligence claim because plaintiffs failed to allege damage to property other than the property repaired. The Court of Appeal reversed, explaining that requiring damage to property other than the repaired structure would “improperly apply principles applicable to defective products to a case premised upon negligent design and engineering” and is not required by the relevant case law.

Siegel v. Anderson Homes, Inc.
118 Cal. App. 4th 994 (5th Dist. May 20, 2004)

Plaintiffs, subsequent purchasers of homes built by defendant Anderson Homes, brought claims for strict liability and negligence for alleged pre-existing defects and structural damage that plaintiffs discovered after purchasing their homes. The construction defects at issue were not “reasonably discoverable” except through an intrusive inspection of the roof and walls.

The trial court entered a judgment in favor of defendant, finding that plaintiffs lacked “standing,” absent an assignment of rights by the original owners to the plaintiffs, to assert claims arising from pre-existing defects. The Court of Appeal, adopting an “accrual at the time of discovery” rule, reversed and held that a cause of action for latent construction defect accrues when an owner discovers, or ought to have discovered, the property damage.

Weseloh Family Limited Partnership v. K.L. Wessel Construction Co., Inc.
125 Cal. App. 4th 152 (4th Dist. Dec. 21, 2004)

Property owner and general contractor brought negligence claims against design professionals (engineers) after failure of portion of retaining walls designed by engineers. Where it was undisputed that engineers were retained by subcontractor who built retaining walls, that a portion of the retaining walls failed, that engineers had no role in the construction of the walls, that engineers had not entered into a contract with either owner or general contractor, that engineers were never compensated by owner or general contractor for their design work, engineers met their burden as party moving for summary judgment of producing evidence that the negligence claims failed because engineers owed no duty of care to owner or general contractor.

Where owner and general contractor failed to produce evidence showing that engineers’ design was primarily intended to affect the plaintiffs, the closeness of plaintiffs’ injury to engineers’ conduct, any moral blame implicated by engineers’ conduct, or how imposing expanded liability on design engineers under similar circumstances would prevent future harm, plaintiffs failed to satisfy their burden of proving the existence of a duty of care or of a triable issue of material fact relevant to determination of the duty issue. The trial court properly granted engineers’ motion for summary judgment.

Consumer Version of SB 800 Guide

CBIA’s Risk Management Task Force has completed work on the consumer version of the SB 800 Guide. Two new pamphlets were developed in an effort to inform homebuyers of the new law and the benefits associated with an alternative to litigation. The first pamphlet is a glossy tri-fold that provides an overview of the “Fix-It” Law. The second pamphlet provides more detailed information and includes the text of the bill.

For more information please contact a member of the Real Estate and Construction Law Blog Editorial Team.