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The Morrison Law Journal
February 2009
Volume IV, Edition 2

Well, Ten Years Is Ten Years ... Court Of Appeal Rules That Ten Year Statute Of
Limitations Period Does Apply And Will Bar A Lawsuit For Construction Defects
Where Suit Was Brought More Than Ten Years After The Filing Of The Notice
Of Completion Even Though (i) The Developer Retained Possession Of The
Residence For More Than A Year After Substantial Completion And
(ii) Suit Was Filed Within Ten Years Of The Plaintiffs' Purchase

By: Edward F. Morrison, Jr., Esq.
Larry A. Schwartz, Esq.

As we have reported many times, the California legislature enacted in
1971 an outside 10 year limit in which to bring property damage claims arising
from latent construction defects. See, Code of Civil Procedure section 337.15.

. The ten year rule has been the subject of. significant case decisions
including Pine Terrace Apartments, ..L.P. v. Windscape, LLC. (2008) Westlaw
68877 ("Pine Terrace case" or "Pine Terrace"), which we reported on just last
month in the January 2009 edition of The Morrison Law !oumal1.

In what appears to be a relatively rare win for developers and contractors,
the Court of Appeal, First District, has ruled that the ten year limitation period
does run from thedate of filing the Notice of Completion and not the date of
purchase, at least where the defects complained of resulted from pre Notice of
Completion work. That decision was issued in Gundogdu v. King MaL Inc.
(2009) Westlaw 330921 ("Gundogdu Case" or "Gundogdu").

The facts of the Gundogdu case are relatively routine: on November 2,
1995, King Mai, Inc. (liKingMai"), a developer, caused a Notice of Completion to
be recorded for a single family residence located at 199 Kings Court in San
. I Carlos, California. On March 13, 1997, plaintiffs Mehmet Gundogdu and Aynar
Gundogdu (the "Gundogdus") dosed on the purchase of the residence. The
Gundogdus acquired the residence from the developer, which retained
possession and control of the property through the date of sale.

1 In Pine Terrace, Court of Appeal, in a case of first impression, ruled that the exemption from the
10 year statute of limitations for "actions based on willful misconduct" applies to crosscomplaints
for indemnity and that an indemnity claim involving willful misconduct may be
asserted against a subcontractor merely by incorporating by reference allegations contained in a
complaint which alleges willful misconduct against the developer.



The March 1997 purchase contract identified 26 repairs that were required.
Between March 1997 and August 1997, King Mai attempted to effect the repairs
to the Gundogdus' satisfaction, but was unsuccessfuL In. October 1997, the
Gundogdus had an independent inspection performed which identified
numerous defects but no repairs were performed in response by King MaL In
December 2002,the Gundogdus contacted King Mai in regard to water leakage.
following a winter storm, which elicited a response from King Mai that there
may be potential responsibility on the part of King MaL However,following
further correspondence from the Gundogdus in January 2003, King Mai
responded that it would not effect any further repairs. In February 2004, the
Gundogdus obtained a second home inspection report which revealed other
problems including excess dirt in the crawl space around the foundation of the
residence. King Mai, again, refused to effect any repairs.

Suit was then filed by the Gundogdus in April 2006, more than ten years
after the recording of the Notice of Completion but less than ten years from the
date of the Gundogdus' purchase of the residence. KingMai filed a Motion for
Summary Judgment under Code of Civil Procedure section 337.15 daimingthat
the defects complained of existed prior to the recording of the Notice of
Completion, that the ten year period ran from the recordation of the Ndtice of
Completion and not the date of purchase, and, by inference, that there was no
basis to claim concealment, equitable estoppel or willful misconduct.

The Trial Court granted Summary Judgment. The Court of Appeal

Significant in the Court of Appeal decision was that the Court affirmed
prior case law decisions which held that the ten year period runs from the date of
substantial completion under Code of Civil Procedure section 337.15(g) and not
the date of the plaintiffs' purchase, See, Schwetz. v.Minnerly (1990) 220
Cal.App.3d 296. In that regard, the Court noted that the ten year period should
run from the date of recordation of the Notice of Completion in November 1995,
and not the date of purchase in March 1997, even though the developer retained
control. This is significant in that Code of Civil Procedure section 337.15(e)
provides that the:

"limitation prescribed by this section shall not be asserted by way
of defense by any person in actual possession or ... control ... of
such improvement ... at the time any deficiency in the improvement
constitutes the proximate cause for which it is proposed to bring an


As to that issue; the Court of Appeal noted Code of Civil Procedure
section 337.15(e) but held that the time the developer retained possession
following the recordation of the Notice of Completipn should not be computed
for purposes of the ten year statute of limitations because the defects complained
of involved pre recordation work.

Second, the Court of Appeal ruled that principles of equitable estoppel
can apply but they must fit within the four part standard set forth in Lantzy v.
Centex Homes
(2003) 31 Ca1.4th 363 which provides that (i) the developer's
representations as to repair must have been made while the statute of limitations
had not yet run, (ii)the plaintiff reasonably relied on the representations, (iii) the
representations proved false and .(iv) the plaintiff proceeded diligently once the
true facts were discovered. In Gundogdu, the Court of Appeal noted that King
Mai refused to make repairs following the February 2004home inspection report
and the limitations period did not expire until November 2005, some twenty
months later.

The Gundogdu case may have limited application as it is a fact driven
case. However, the decision isimportant in that it affirms prior case law which
provides that the ten year limitation period commences upon substantial
completion of the improvement, that the developer's post completion possession
will not delay the commencement of the limitations period (at least where the
defects being complained of relate to pre substantial completion construction)
and there will be no equitable estoppel claim where the developer declines to
effect repairs and there is a period of at least a year from the developer's refusal
to make repairs and the deadline to file suit.

About the Authors: Edward F. Morrison, Jr. is the founding partner and Larry A.
Schwartz is of counsel to The Morrison Law Group, a professional corporation.
Their biographies can be viewed at

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