Tuesday, May 3, 2005
Limitations Period Defense for Construction Defects Restricted
Showing of Builder’s Own Knowledge Held Unnecessary to Invoke ‘Willful Misconduct’ Exception
By DAVID WATSON, Staff Writer
An exception to the 10-year limitations period for filing a suit over latent construction defects applicable where “willful misconduct” is involved does not require a showing the builder itself knew of the misconduct, this district’s Court of Appeal has ruled.
Invoking principles of strict liability and respondeat superior as well as statutes governing general contractors, Justice H. Walter Croskey on Friday said the exception applies when the action is based on “willful misconduct by someone,” whether it is the builders themselves or “subcontractors hired by them.”
The court reversed a summary judgment in favor of the general contractor and developer of a tract of homes built in Palmdale in 1989. Nearly 60 homeowners sued Glenfed Development Corporation and Glenfed Development Ventures Corporation in 1999 claiming the homes were built on improperly prepared soil and that the foundations, among other parts of the homes, were substandard.
Then-Los Angeles Superior Court Judge Thomas L. Willhite Jr., now a member of this district’s Court of Appeal, granted Glenfed’s motion for summary judgment under Code of Civil Procedure Sec. 337.15, which establishes the 10-year limitations period but exempts “actions based on willful misconduct or fraudulent concealment.” Glenfed, calculating from the recording dates of notices of completion for the homes, claimed 47 of the plaintiffs either filed their claims or joined the litigation after the 10-year period had expired.
The plaintiffs submitted expert declarations that the substandard techniques used saved the builder money and would have been obvious to any competent construction supervisor. The defective work, they declared, was “so serious and prevalent” that it could only have been the result of either a “deliberate decision to ‘cut corners’” or of a “near total, virtually reckless, failure by the developer to adequately supervise subcontractors.”
In granting the motion, Willhite reasoned that that the declarations failed to provide evidence that any willful misconduct which occurred had been committed either directly by the defendants or under their supervision.
But Croskey, writing for Div. Three, said no such showing was necessary.
“Defendants essentially argue that whatever willful misconduct may have occurred in the construction process was done by...subcontractors and there was no evidence produced by plaintiffs demonstrating that defendants had any knowledge of or participation therein. This argument, however, fails to recognize the legal significance of the position occupied by a general contractor/developer in a residential construction project....”
Under both the case law making developers strictly liable for construction defects and statutes laying out the obligations of general contractors, Croskey explained, the “supervisory obligation” of a builder “is a non-delegable duty and cannot be avoided by entrusting it to an independent contractor.”
The justice added:
“There is no sound public policy reason to deviate from this well-established principle when the question is extending the statute of limitations applicable to those defects as opposed to imposing monetary liability for the defects....To hold that the developer is not subject to the provisions of [Sec.] 337.15, subdivision (f), because the willful misconduct was committed by its chosen subcontractors would allow the developer to escape the strict liability established by Kriegler [v. Eichler Homes, Inc. (1969) 269 Cal.App.2d 224].”
“Moreover, imputing the subcontractor’s willful misconduct to the developer is not only consistent with the policies underlying Kriegler, it is also fully consistent with general principles of respondeat superior, which hold a principal liable not just for the negligence of an agent but for intentional acts of the agent so long as the misconduct occurs within the course and scope of the agency.”
The “willful misconduct” exception of Sec. 337.15(f) is “an incentive for the general contractor and the developer to choose subcontractors carefully, with an eye toward quality construction rather than just the bottom line,” Croskey concluded, pointing out that the statute “states only that the 10-year limitation period ëshall not apply to actions based on willful misconduct or fraudulent concealment’ (italics added), and this case is clearly based on plaintiffs’ allegations of willful misconduct by either defendants or parties hired by defendants to construct defendants’ residential building project.”
“Given that statutory language, it is only necessary that the action be based on and arise from willful misconduct by someone. It does not matter whether defendants committed such misconduct directly or it was done by subcontractors hired by them.”
The court’s holding, Croskey said, was not a “judicially created extension or expansion of liability.” Instead, he asserted, it “merely represents an application of the relevant body of law to an express statutory exception to the ëfirm and final’ 10-year limitation on a contractor’s liability exposure for latent defects.”
The justice wrote:
“Nothing in the language of section 337.15 indicates the Legislature intended to dispense with the doctrines of vicarious liability and nondelegable duties, nor with the statutory responsibilities of contractors for supervision of their work, when a defendant developer or general contractor claims a right to the 10-year limitation provision and the plaintiff asserts the willful misconduct exception to application of that provision.”
Justice Patti S. Kitching and Presiding Justice Joan Dempsey Klein concurred.
Among the groups participating in the appeal as amici were the Consumer Attorneys of California, the California Building Industry Association, the Building Industry Legal Defense Foundation, the Civil Justice Association of California, the Construction Employers Association, and the California Professional Association of Specialty Contractors.
The case is Acosta v. Glenfed Development Corp., 05 S.O.S. 2150.
Copyright 2005, Metropolitan News Company