City Water International Inc. v. 816580 Ontario Inc.
SwansonWritingSampleSummer2014
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SUPERIOR COURT OF CALIFORNIA
COUNTY OF SANTA CLARA
P1 and P2,
Plaintiffs,
vs.
D1, D2, and DOES 1 through 50, inclusive,
Defendants.
Case No.:111CV194089
TENTATIVE DECISION
D1, D2,
Cross-Complainant,
vs.
CD1, CD2, and ROES 1 through 1000,
inclusive,
Cross-Defendants.
The above entitled case was tried on January 13, 2014 in Department 21 of the above
entitled Court, the Honorable Joseph H. Huber presiding without a jury. The appearances are as
stated in the record. The record will reflect that, rather than taking testimony, the parties directed
the Court to numerous pleadings, motions, briefs and transcripts to be used, along with closing
briefs, to decide the case.
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The Court, having considered all of the evidence, the credibility of the witnesses and pre-
and post-trial briefs, issues its Tentative Decision in accordance with Code of Civil Procedure
Section 632 and California Rules of Court Section 3.1590. This Tentative Decision will become
the Statement of Decision unless, within 20 days, any party specifies controverted issues or
makes proposals not covered in this Tentative Decision. If no specification or proposal is made
the Court will, at the expiration of the 20-day period, prepare and enter judgment.
Facts
Plaintiffs, P1, filed their initial complaint against D1 et al on February 10, 2011.
Defendants, D1 and D2, filed a cross-complaint for indemnity against various subcontractors,
including CD1 on May 4th, 2012. On October 4th, 2013 a settlement was reached between the P1
and all other parties except Cross-Defendant CD1. As part of the settlement, Defendants
assigned their interests to the P1, who now seek judgment against CD1. A term of the settlement
between Plaintiffs and Defendants was Defendant’s agreement to assign to Plaintiffs the
following: (1) Defendants’ contracts with CD1, (2) Defendants Cross-Complaint against CD1;
and (3) the right to recover Defendants’ out of pocket expenses for defense fees and costs
incurred during the course of this action for which Defendants have not been reimbursed to date.
After all the dust settled, the only remaining pleading, and the one at issue here, is Defendants’
May 4th, 2012 Cross-Complaint against CD now assigned to Plaintiff.
Issues
The issues remaining in this case are:
1. Whether the P1’ complaint is barred by the ten year statute of limitations as stated in CCP
§337.15 including:
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a. Whether fraud or willful misconduct is an exception to the ten year statute of
limitations.
b. Whether actual possession by the developer is an exception to the ten year statute
of limitations.
2. Whether the ten year statute bars Defendants’ Cross-Complaint against CD.
Facts
On May 18, 2000, Plaintiffs purchased the residential property at 3255 Macomber Dr.,
Pebble Beach, CA from Defendants. Close of escrow was originally scheduled for November 15,
2000 but the house was then still under construction so the close was moved to February 15,
2001. The P1 took possession of the property on February 15, 2001.
Plaintiffs alleged construction defects, including inadequate exterior stucco protection
and improper flashing and sealing which caused water intrusion, wood rot, and mold. The P1
allege that the Defendants, especially D1’s V.P., in a note dated July 23, 2001, promised that the
stucco was water tight and that the windows were installed adequately. Additionally, The P1
allege that D1’s V.P. of finance, promised on June 2, 2008 that he would accept responsibility
and cure any defects. (Second Amended Complaint, Exb. 1)
The notice of completion of the home was filed in the County Recorder’s Office on
February 2, 2001. CD’s request for admissions to Plaintiff dated July 12, 2013 were deemed
admitted by court order dated September 13, 2013. The admissions established, among other
things: 1) no statute of limitations was equitably tolled during any time repairs were performed
and 2) the recorded notice of completion is valid and marks the actual completion of the
development.
Discussion
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1. Whether the complaint by the P1 is barred by the ten year statute of limitations as
stated in CCP §337.15 .
CD argues that CCP §337.15 (g) (2) bars the P1 from filing a complaint past the ten year
statute of limitations. The statute holds that:
“No action may be brought to recover damages from any person…who develops
real property or performs or furnishes the design, specifications, surveying,
planning, supervision, testing, or observation of construction, or construction of
an improvement to real property more than ten years after the substantial
completion of the development or improvement.”
This is an action for the development of real property including improvements. The
request for admissions conclusively established that February 2, 2011 was the actual completion
date of the project. The P1’s complaint was filed February 10, 2011, 8 days after the statute of
limitations had expired on February 2, 2011. Thus, under normal circumstances, the statute of
limitations would apply. However, the P1 argue that exceptions under CCP §337.15 (e) and (f)
apply and excuse the requirement that an action be brought within ten years of substantial
completion.
a. Whether fraud or willful misconduct is an exception to the ten year statute of
limitations.
The P1 allege that §337.15(f) applies, which states:
“This section shall not apply to actions based on willful misconduct or fraudulent
concealment.”
The P1 argue that Defendants were generally negligent and fraudulently concealed
defects. The P1 allege that D’s Vice President of Finance, on June 2, 2008, orally promised, and
subsequently confirmed in writing on 6/27/08 to the P1 that Defendants would accept
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responsibility for repairs and would pay for the defects. (Second Amended Complaint, Exb. 1)
The P1 also proffer a letter written by D1’s Vice President on July 23, 2001 that the stucco on
the property conforms to original specifications as further proof. (Second Amended Complaint
Exb.1)
The P1 have the burden of proving that fraud or willful misconduct existed on the part of
D1 et al. sufficient to defeat the ten year statute of limitations. The Court was directed to the
second amended complaint for such proof. If one accepts as true the P1’ claims of oral and
written promises to repair (and the exhibits to the second amended complaint are hardly
persuasive) they arguably rise to the level of negligence or breach of contract but not to fraud or
willful misconduct. The P1 have not met their burden of establishing fraud or willful misconduct.
b. Whether actual possessionis an exception to the ten year statute of limitations.
The P1 allege that CCP §337.15(e) applies, which states:
“ The limitation prescribed by this section shall not be asserted by way of defense
by any person in actual possession or the control, as owner, tenant or otherwise,
of such an improvement, at the time any deficiency in the improvement
constitutes the proximate cause for which it is proposed to bring an action.”
The P1 allege that Defendant D1 was in actual possession and owned the home at the
close of escrow and thus CCP §337.15(e) applies excepting the claim from the ten year statute of
limitations. Title was conveyed to the P1 on February 15, 2001; Defendants were the owners
before that date. However, the ten year statute of limitations refers to the owner at the time the
deficiency becomes the proximate cause of the damages. Eden v. Van Time, (1978) 83 Cal. App.
3d 879. In this case, the deficiency which became the proximate cause of the damage was
discovered by the P1, while they were in possession of the home, not the Defendants.
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The P1 also claim that the complaint was filed less than ten years after taking possession
of the home because the statute was tolled during repairs. However, the ten year limit is not
tolled between the time of sale and time to fix the defect. Gundogdu v. King Mai, (2009) 171
Cal. App. 4th 310. This would defeat the purpose of the statute, which is to protect contractors
and other professional and trades people in the construction industry from extended liability. Id.
The Court concludes that CCP §337.15(e) does not apply because the deficiency was
discovered when the P1 were in possession of the home and tolling does not apply under these
circumstances.
2. Whether the ten year statute bars Defendants’ Cross-Complaints against CD.
CCP §337.15 requires that a suit to recover damages for a latent design or construction
defect be brought within ten years of the date of substantial completion of the improvement,
regardless of the date of discovery of the defect. The statute is an absolute bar, to which there is
only one exception in section CCP §337.15(c). This applies in actions for indemnity filed outside
the ten year period if the main action has been brought within the ten years. In this case,
Plaintiff’s complaint, the main action, was not brought within the absolute ten year limit.
Therefore, Defendants’ Cross-Complaint for indemnity against CD, filed on May 4, 2012, is also
untimely and thus barred by the absolute ten year limitations period.
Judgment
To the extent this decision has not elaborated upon certain arguments advanced by the parties, or
evidence received, these arguments and evidence have, nonetheless been considered by the
Court. After consideration of all the evidence, pre- and post- trial briefs and arguments of
counsel, judgment will be entered as follows:
1. The Complaint is barred by §CCP 377.15(g) (2).
