Morrison Law Journal


The Morrison Law Journal January 2018 Volume XIII, Edition 1 A Win For Builders in California: California Supreme Court Rules That Right to Repair Act Provides Exclusive Remedy For Residential Construction Defect Claims By: Edward F. Morrison, Jr., Esq. Larry A. Schwartz, Esq.
Over the past few years, there have been a number of decisions of the California Courts of Appeal that appeared to chip away at the Right to Repair Act, California Civil Code § 895, et seq. ("Right to Repair Act" or "Act") process and procedure. For example, in Liberty Mutual Ins. Co. v. Brookfield Crystal Cove LLC (2013) 219 Cal.App.4th 98, 101 ("Liberty Mutual"), the Court of Appeal ruled that the Right to Repair Act was adopted to provide a remedy for construction defects causing only economic loss and did not alter preexisting common law remedies in cases where actual property damage or personal injuries resulted (that case concerned a claim for property damage resulting from a latent defect involving the subject home's sprinkler system which resulted in a sudden loss after the time period called for in the Right to Repair Act). In another case that followed Liberty Mutual, Burch v. Superior Court (2014) 223 Cal.App.4th 1411 ("Burch"), the Court of Appeal concluded that the Right to Repair Act did not limit common law claims for damages for construction defects that have caused property damage (that case concerned claims by the purchaser of a high end residence against the general contractor and for breach of the sales contract, negligence, breach of implied warranty, unjust enrichment, and breach of contract/third party beneficiary). Given the holdings in the Liberty Mutual and Burch cases, some plaintiff practitioners argued that the Right to Repair Act process and procedure may not apply, at least where there is a claim of property damage or no violation of the Act is alleged. This question was brought to a head in the California Supreme Court decision in McMillin Albany, LLC v. Superior Court (2018) Westlaw 456728 ("McMillin Albany") issued on January 18, 2018. In McMillin Albany, Plaintiffs Carl and Sandra Van Tassel and several dozen other homeowners purchased 37 new single-family homes from developer and general contractor McMillin Albany LLC at various times after January 2003. In 2013, the Van Tassels sued the developer/general contractor alleging the homes were defective in nearly every aspect of their construction, including the foundations, plumbing, electrical systems, roofs, windows, floors, and chimneys. The developer/general contractor then sought a stipulation to stay the litigation in order so the parties could proceed through the informal process contemplated by the Right to Repair Act. The plaintiffs elected not to stipulate and argued that, since their amended Complaint made no reference to the Right to Repair Act, they were not bound to comply with the Act. The trial court denied the request for stay, but certified the issue as one worthy of immediate review. The developer/general contractor then sought a writ. The Court of Appeal granted the petition and issued the writ, disagreeing with the holdings in Liberty Mutual and Burch. The California Supreme Court then granted review. - 2 - In its decision, the California Supreme Court ruled, unanimously, that that the homeowners' common law action constituted an action seeking recovery of damages arising from deficiencies in residential construction and, thus, the plaintiff homeowners were required to comply with pre-litigation procedures under the Right to Repair Act, including the notice of claim and the builder's right to effect repairs. In its holding, the California Supreme Court reviewed the legislative history for the Act and concluded that the Act was designed as a broad reform package that would substantially change existing law by displacing some common law claims and substituting in their stead a statutory cause of action with a mandatory pre-litigation process. The California Supreme Court also acknowledged that the plaintiffs had dismissed their Right to Repair Act claims but concluded that the suit remained an action seeking recovery of damages arising out of, or related to deficiencies in, the construction of the plaintiffs' homes, and the Act, therefore, applied. The California Supreme Court did note that the case does not involve a catastrophic occurrence or emergency repairs, but commented that the Act's provisions were sufficiently general that the Act could be adapted in "extreme circumstances." The McMillin Albany case is a significant decision in that the California Supreme Court has ruled that the California Legislature, in enacting the Right to Repair Act, intended that claims for construction defects by residential homeowners come within the ambit of the Act, whether or not violations of the Act are claimed in the Complaint or there are claims for property damage. 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 www.morrisonlawgroup.com. Publication Note: The Morrison Law Group wishes to disseminate this publication to all clients and colleagues of the Firm who wish to receive it. Should any recipient desire to be removed from the distribution list, or wishes to have a colleague added, please contact Jim Van Dusen at The Morrison Law Group at 213 356-5504 or vandusen@morrisonlawgroup.com. Disclaimer Note: The legal article presented above is intended to provide general information which may be of interest or use to clients and colleagues of The Morrison Law Group and should not be construed as legal advice on any matter. 2

Over the past few years, there have been a number of decisions of the California Courts of Appeal that appeared to chip away at the Right to Repair Act, California Civil Code § 895, et seq. ("Right to Repair Act" or "Act") process and procedure. For example, in Liberty Mutual Ins. Co. v. Brookfield Crystal Cove LLC (2013) 219 Cal.App.4th 98, 101 ("Liberty Mutual"), the Court of Appeal ruled that the Right to Repair Act was adopted to provide a remedy for construction defects causing only economic loss and did not alter preexisting common law remedies in cases where actual property damage or personal injuries resulted (that case concerned a claim for property damage resulting from a latent defect involving the subject home's sprinkler system which resulted in a sudden loss after the time period called for in the Right to Repair Act). In another case that followed Liberty Mutual, Burch v. Superior Court (2014) 223 Cal.App.4th 1411 ("Burch"), the Court of Appeal concluded that the Right to Repair Act did not limit common law claims for damages for construction defects that have caused property damage (that case concerned claims by the purchaser of a high end residence against the general contractor and for breach of the sales contract, negligence, breach of implied warranty, unjust enrichment, and breach of contract/third party beneficiary).

Given the holdings in the Liberty Mutual and Burch cases, some plaintiff practitioners argued that the Right to Repair Act process and procedure may not apply, at least where there is a claim of property damage or no violation of the Act is alleged. This question was brought to a head in the California Supreme Court decision in McMillin Albany, LLC v. Superior Court (2018) Westlaw 456728 ("McMillin Albany") issued on January 18, 2018. In McMillin Albany, Plaintiffs Carl and Sandra Van Tassel and several dozen other homeowners purchased 37 new single-family homes from developer and general contractor McMillin Albany LLC at various times after January 2003. In 2013, the Van Tassels sued the developer/general contractor alleging the homes were defective in nearly every aspect of their construction, including the foundations, plumbing, electrical systems, roofs, windows, floors, and chimneys. The developer/general contractor then sought a stipulation to stay the litigation in order so the parties could proceed through the informal process contemplated by the Right to Repair Act. The plaintiffs elected not to stipulate and argued that, since their amended Complaint made no reference to the Right to Repair Act, they were not bound to comply with the Act. The trial court denied the request for stay, but certified the issue as one worthy of immediate review. The developer/general contractor then sought a writ. The Court of Appeal granted the petition and issued the writ, disagreeing with the holdings in Liberty Mutual and Burch. The California Supreme Court then granted review.

- 2 -

In its decision, the California Supreme Court ruled, unanimously, that that the homeowners' common law action constituted an action seeking recovery of damages arising from deficiencies in residential construction and, thus, the plaintiff homeowners were required to comply with pre-litigation procedures under the Right to Repair Act, including the notice of claim and the builder's right to effect repairs. In its holding, the California Supreme Court reviewed the legislative history for the Act and concluded that the Act was designed as a broad reform package that would substantially change existing law by displacing some common law claims and substituting in their stead a statutory cause of action with a mandatory pre-litigation process. The California Supreme Court also acknowledged that the plaintiffs had dismissed their Right to Repair Act claims but concluded that the suit remained an action seeking recovery of damages arising out of, or related to deficiencies in, the construction of the plaintiffs' homes, and the Act, therefore, applied. The California Supreme Court did note that the case does not involve a catastrophic occurrence or emergency repairs, but commented that the Act's provisions were sufficiently general that the Act could be adapted in "extreme circumstances."

The McMillin Albany case is a significant decision in that the California Supreme Court has ruled that the California Legislature, in enacting the Right to Repair Act, intended that claims for construction defects by residential homeowners come within the ambit of the Act, whether or not violations of the Act are claimed in the Complaint or there are claims for property damage.

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 www.morrisonlawgroup.com.

Publication Note: The Morrison Law Group wishes to disseminate this publication to all clients and colleagues of the Firm who wish to receive it. Should any recipient desire to be removed from the distribution list, or wishes to have a colleague added, please contact Jim Van Dusen at The Morrison Law Group at 213 356-5504 or vandusen@morrisonlawgroup.com.

Disclaimer Note: The legal article presented above is intended to provide general information which may be of interest or use to clients and colleagues of The Morrison Law Group and should not be construed as legal advice on any matter.

The Morrison Law Journal January 2018 Volume XIII, Edition 1 A Win For Builders in California: California Supreme Court Rules That Right to Repair Act Provides Exclusive Remedy For Residential Construction Defect Claims By: Edward F. Morrison, Jr., Esq. Larry A. Schwartz, Esq.

The Morrison Law Journal
January 2018
Volume XIII, Edition 1

A Win For Builders in California: California Supreme Court Rules That Right to Repair
Act Provides Exclusive Remedy For Residential Construction Defect Claims

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