Acqua Vista Homeowners Assn. v. MWI, Inc. 1/26/17, CA4/1
HOA sued supplier of pipes alleging a single count under the Right to Repair Act (Civil Code section 896 et seq). HOA proved to the jury that the pipes installed in the condominium project contained manufacturing defects, had leaked and caused damage. The jury awarded $18.5 million to repair the pipes and $7.13 million for relocation and storage expenses while repairs were made. However, HOA failed to prove that supplier had been negligent or breached its contract, and apparently didn’t even try. The trial court rejected supplier’s motion for JNOV (a demurrer to the evidence), holding that the Right to Repair Act does not require HOA to prove negligence on claims where strict liability would apply. The celebration was on! But then, supplier appealed and 4DCA/1 reversed.
A dangerously brief background on the Right to Repair Act. In Aas v. Superior Court (2000) 24 Cal.4th 627, the California Supreme Court held that construction defects in residential properties, in the absence of actual property damage, were not actionable in tort. In 2002, the California Legislature enacted the Right to Repair Act, overruling Aas. The Act contains enumerated building standards and liability attaches regardless of whether the violation of the standard had resulted in actual damage or injury. That is, the Act provides remedies where construction defects have negatively affected the economic value of a home. The Act can of course also be used to recover for defects that have in fact caused damage. Still, according to Miller & Starr, the Act was not meant to eliminate a property owner’s common law rights and remedies arising from defects resulting in actual property damage. And some courts have rejected the contention that the Right to Repair Act barred common law claims of negligence, including strict liability, for actual property damage.
In Acqua Vista, therefore, the HOA could have alleged common law claim for strict liability, but didn’t. Instead, it put all its hope in the Act and in the last sentence of Civil Code 936, which seemed to suggest that the HOA could rely on strict liability in making its claim against the supplier. Section 936 provides in part:
“Each and every provision of the other chapters of this title apply to general contractors, subcontractors, material suppliers, individual product manufacturers, and design professionals to the extent that the general contractors, subcontractors, material suppliers, individual product manufacturers, and design professionals caused, in whole or in part, a violation of a particular standard as the result of a negligent act or omission or a breach of contract . . . . However, the negligence standard in this section does not apply to any general contractor, subcontractor, material supplier, individual product manufacturer, or design professional with respect to claims for which strict liability would apply.”
The Court nonetheless agreed with supplier’s argument that claims made against material suppliers under the Act still required a showing of negligence: “The first sentence of section 936 contains an “explicit adoption of a negligence standard for claims” under the Act against material suppliers.” While the final sentence of that same section suggests the exact opposite, the court reasoned: “that this sentence merely provides that the negligence standard applicable to claims brought against material suppliers under the Act does not apply to common law claims for strict liability against such suppliers. Since it is undisputed that the HOA’s claim was brought under the Act” it was required to prove that the supplier breached a duty, under a negligence theory or contract. For more on the court’s analysis, you’ll have to go to the opinion, which is long (50 pages) and often hard to follow.
For reasons that are not clear, the Court does not discuss section 942, which suggests that a claim can be made under the Act merely by showing that standards listed in the Act have not been met. That section provides:
“In order to make a claim for violation of the standards set forth in Chapter 2 (commencing with Section 896), a homeowner need only demonstrate, in accordance with the applicable evidentiary standard, that the home does not meet the applicable standard, subject to the affirmative defenses set forth in Section 945.5. No further showing of causation or damages is required to meet the burden of proof regarding a violation of a standard set forth in Chapter 2 (commencing with Section 896), provided that the violation arises out of, pertains to, or is related to, the original construction.”
Litigants don’t usually put all their eggs in one basket, or, in this case, one egg in one basket. The HOA should have included a strict liability claim; but hopefully it seeks review of this decision. The HOA has the better argument: In light of the history and purpose of the Act, why would the Act make it harder to recover for claims that historically could be based on a strict liability theory? The decision is hard to reconcile with the language of section 936, the language of section 942, and the purpose of the Act.
