September 30, 2013
Via Overnight Mail
Honorable Chief Justice Tani G. Cantil-Sakauye
and Associate Justices of the California Supreme Court
350 McAllister Street
San Francisco, California 94102
Re: Request for Depublication (Rules of Court, Rule 8.1125)
Liberty Mutual Insurance v. Brookfield Crystal Cove
Case No. G046731, filed August 28, 2013; modified September 26, 2013
Honorable Chief Justice Cantil-Sakauye and Associate Justices:
Hecht Solberg Robinson Goldberg & Bagley, LLP (“HechtSolberg”) respectfully requests depublication of Liberty Mutual Insurance Company v. Brookfield Crystal Cove LLC, Case No. G046731. In Liberty Mutual, the Court of Appeal, Fourth District, Division Three, ruled that the “Right to Repair Act,” Civil Code § 895 et seq., which for over ten years has been consistently held to be the exclusive remedial basis for residential construction defect claims, has mandatory application only in cases involving latent defects where no actual property damage has occurred. In its ruling, the Court of Appeal stated:
We hold the Act does not eliminate a property owner’s common-law rights and remedies, otherwise recognized by law, where, as here, actual damage has occurred. (Slip Opinion, page 2.)
We anticipate that the Respondent, Brookfield Crystal Cove LLC, will petition for review and we support such a petition. However, whether or not a petition for review is granted, we ask that this Court depublish the Court of Appeal’s opinion. We believe depublication is appropriate for two overlapping reasons. First, the Court of Appeal incorrectly interpreted the plain language of the Act. Second, the decision will create an enormous amount of uncertainty for all parties involved in construction defect claims including courts, homeowners, developers, building industry tradesmen, and insurance companies.
HechtSolberg is a real estate law firm that has represented real estate developers and property owners throughout the State of California for more than forty years. We have not, as a firm, requested depublication before. However, the Liberty Mutual decision will wreak havoc for many businesses and homeowners who thought construction defect was a well-settled area of law.
The facts of Liberty Mutual are not complex. A homebuyer purchased a new single-family home from a builder in 2004, after the effective date of the Act. Several years later, a sprinkler pipe in the residence burst. The builder agreed to pay for the cost of repairs to the residence but refused to pay for the owner’s relocation expenses while the repairs were performed. The homeowner successfully pursued a claim for recovery of those relocation costs from his insurance carrier. The insurer, Liberty Mutual, then filed a subrogation action against the builder. The insurer did not even attempt to comply with the Act’s pre-litigation dispute resolution procedures. The trial court dismissed the insurer’s claims because the Act’s four-year limitations period for plumbing system claims had already passed.
The Court of Appeal reversed the trial court, holding that the Act’s limitations period did not apply. The Court of Appeal held that the Act has mandatory application only in cases involving latent defects in which no property damage has occurred, and not in cases involving actual property damages. The court held that, when there was property damage because of a patent defect, claimants may pursue common-law tort claims, such as strict liability and negligence. Those other claims are subject to different statutes of limitation than appear in the Act.
The appellate court incorrectly interpreted the Act, which makes no distinction between latent and patent defects. Courts recognize the Act as a comprehensive method of resolving construction defect claims. See Baeza v. Superior Court (2011) 201 Cal.App.4th 1214, 1222; Greystone Homes, Inc. v. Midtec, Inc. (2008) 168 Cal.App.4th 1194.
Civil Code § 896 states that the Act applies in “any action seeking recovery of damages arising out of, or related to deficiencies in, the residential construction.” Similarly, Civil Code § 936 applies the Act to all contractors, subcontractors, and so on, who could be liable “as the result of a negligent act or omission or a breach of contract.” Civil Code § 943 bars other causes of action for “a claim covered by this title.” A sprinkler pipe is certainly “related to deficiencies in…residential construction” under Section 896. The Court of Appeal did not even approach the question correctly. It began its analysis with a review of portions of the legislative history, but it is elementary that statutory interpretation begins with the language of the statute itself. E.g., People v. Cornett (2012) 53 Cal.4th 1261, 1265. Where courts have considered the legislative history of the Act, courts recognize the intent to provide an all-inclusive framework for resolving construction defect claims. See Baeza, supra, 201 Cal.App.4th at 1222 (embracing the legislature’s intent “to ‘specify the rights and requirements of a homeowner to bring an action for construction defects, including applicable standards for home construction, the statute of limitations, the burden of proof, the damages recoverable, a detailed pre-litigation procedure, and the obligations of the homeowner.’ (Legis. Counsel’s Dig., Sen. Bill No. 800 (2001–2002 Reg. Sess.))” (citing Anders v. Superior Court (2011) 192 Cal.App.4th 579, 585)).
The Liberty Mutual decision will, if not depublished, completely destabilize the field of construction defect litigation that the Act was intended to stabilize. For example, the decision holds that the Act applies to latent defects without property damage but not to patent defects. The facts in Greystone Homes, Inc. show the problems with this holding as it will be applied to other cases. In Greystone Homes, Inc. the builder filed a cross-claim against the manufacturer of a certain plumbing part. Greystone Homes, Inc., supra, 168 Cal.App.4th at 1203-04. In 66 homes containing the defecting plumping part, some of the plumbing parts leaked and others did not resulting in both latent and patent defect claims. Id. As the Act was intended to provide, the builder repaired all latent and patent defects for a repair cost of more than $1 million. Id. As this case illustrates, many construction defect claims brought by homeowners and homeowners associations contain both latent and patent defects, not only from one home to the next, but within the same home.
Under Liberty Mutual, those claims will be split, some using the Act’s pre-litigation procedures and some going directly to an adversarial proceeding. Civil Code § 896 sets out specific construction standards for water issues, soil issues, and so on. Under Liberty Mutual, though, those standards might or might not apply. One purpose of the Act, not mentioned in the Court of Appeal’s analysis of the legislative history, was to reduce the need for costly experts; Liberty Mutual restores that need, depending on how a court characterizes the problem.
Regardless of whether this Court grants review, the Court of Appeal’s decision should be depublished. It will create confusion and uncertainty throughout the real estate and construction industry and greatly increase the amount of litigation courts must face.
HECHT SOLBERG ROBINSON GOLDBERG & BAGLEY LLP
cc: Attached Proof of Service List