Appellate Court Rules Again that the Right to Repair Act is the Exclusive Remedy for Construction Defect Claims

Author: Elizabeth Terrill

August 10, 2017 2:02pm

Gillotti v. Stewart (2017) 11 Cal.App.5th 875: 

We have recently seen multiple appellate cases addressing whether the Right to Repair Act, as set forth in Civil Code Section 895, et seq. (“SB 800”), preempts common law claims for damages, which run contrary to Liberty Mutual Insurance Company v. Brookfield Crystal Cove LLC (2013) 219 Cal.App.4th 98 (“Liberty Mutual”) (held SB 800 does not eliminate common law claims where construction defects caused actual damage).

SB 800 established a set of building standards for new residential construction and creatied prelitigation procedures.  These procedures were designed to allow for the repair of alleged defects by developers before costly litigation and to provide homeowners with a statutory cause of action against builders and others for violation of the building standards.  Specifically, upon a showing of violation of any applicable standard, SB800 allows homeowners to recover economic losses without having to show property damage or personal injury, legislatively superseding the Aas v. Superior Court (2000) 24 Cal.4th 627 (precluded damages for construction defects that have not yet caused property damage or personal injury).

Since the ruling in Liberty Mutual, there have been several cases[1] which re-examined this issue.  In the latest of this string of cases, Gillotti v. Stewart (2017) 11 Cal.App.5th 875 (“Gillotti”), the Third Appellate District held SB800 precludes common law claims for damages caused by construction defects, subject to its specific exclusions.  This decision is the second time the Third Appellate District has disagreed with the ruling in Liberty Mutual and is further evidence of the split of authority.

In Gillotti, the plaintiff purchased a newly-constructed vacation home which developed various problems.  The plaintiff filed a construction defect case against the builder/seller, general contractor, and grading subcontractor, alleging various defects, including grading issues and the need to remove two large trees which were dying.  Plaintiff alleged the trees were dying due to the addition of soil placed over the tree roots to level the driveway on the sloped lot.

Because subcontractors are not engaged in “selling homes,” SB800 requires a showing the subcontractor negligently caused a violation of the building standards in whole or in part.  The jury found, while the construction did violate some of the building standards, the grading subcontractor was not negligent, causing the trial court to find in favor of the grading subcontractor.

The plaintiff moved for judgment notwithstanding the verdict or a new trial, arguing, in part, the trial court improperly barred a common law negligence theory against the subcontractor. The trial court denied the motions, ruling that “[t]he Right to Repair Act specifically provides that no other causes of action are allowed.  See Civil Code, section 943.”  Gilloti at 886.  The trial court further specifically acknowledged its decision conflicted with Liberty Mutual, but that Liberty Mutual “was wrongly decided and, because it came from a different appellate district, was not binding on the trial court.”  Gillotti at 868.

Plaintiff appealed the trial court’s rulings, arguing the trial court “improperly construed the Act as barring a common law negligence theory” against the grading subcontractor for tree damage resulting from its work.  Plaintiff further argued the trial court erred in failing to follow Liberty Mutual, which held SB800 does not eliminate common law claims where construction defects caused actual damage.

 

Holding:

On appeal, the Court noted SB 800’s statutory language “clearly and unequivocally expresses the legislative intent that SB 800 apply to all actions seeking relief of recovery of damages arising out of, or related to deficiencies in, residential construction, except as specifically set forth in SB 800,” and SB 800 “does not specifically except actions arising from actual damages.” The court also confirmed the specific driveway issues underlying the plaintiff’s claim fell within the scope of Civil Code Section 897.  In this regard, the Court of Appeal affirmed the judgment and post-trial orders of the trial court.

This decision is clearly in keeping with Third Appellate District’s previous decision, Elliott Homes, in which it held the Right to Repair Act’s pre-litigation procedures apply when homeowners plead construction defect claims based on common law causes of action, as opposed to violations of the building standards.  Elliott Homes, however, remains on hold at the California Supreme Court, pending a decision in McMillin Albany, the case where the reasoning of Liberty Mutual was first rejected on the appellate level.  Given the continued negative treatment of Liberty Mutual, it is likely the California Supreme Court will address this split in authority.

[1] Elliott Homes, Inc. v. Superior Court (2016) 6 Cal.App.5th 333, 344 (“Elliott Homes”), review granted March 15, 2017 and McMillin Albany LLC v. Superior Court (2015) 192 Cal.Rptr.3d 53 (“McMillin Albany”), review granted November 24, 2015

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