Elliott Homes, Inc. v. Superior Court (update)
On December 2 last year, the Court of Appeal for the state of California elaborated on the scope of what has been long referred to as “SB 800,” or the Builder’s Right to Repair Act (Cal. Civil Code Sec. 895 et. seq.). Interpreting the standards and application of the Act has been confusing at times, and with little case law on the books to help define it, attorneys for homeowners and associations have been finding their way through the language of the statutes for several years now. The biggest problem concerned how to apply the Act when HOAs and homeowners brought a typical construction defect case based on tried and true legal theories like breach of warranty, strict liability, and negligence. With the Elliott Homes decision, there is now some additional clarity. The opinion in Elliot Homes secures California residential builders’ right to compel the pre-litigation dispute resolution and repair procedures under the Act set forth in Cal. Civil Code 910 et seq., regardless of whether a statutory claim for construction deficiencies under the Act is pleaded.
For a few years, under the ruling in a case called Liberty Mutual Ins. Co. v Brookfield Crystal Cove, LLC (2013) 219 Cal.App.4th 98 (hereinafter “Liberty Mutual”), plaintiffs in residential construction defect actions could actually bypass the Right to Repair Act by pleading “common law” causes of action for construction defects resulting in actual damage. The Plaintiffs in Elliot Homes similarly sought to avoid the pre-litigation dispute resolution procedures in SB800 by pleading only common law claims for construction defects against the residential developer of 17 single family homes. In response, Elliot Homes, Inc. filed a motion to compel the Plaintiffs to comply with the Act’s pre-litigation dispute resolution procedures under section 930(b) of the Act. The trial court denied the motion to stay, citing Liberty Mutual for the proposition that the Act’s pre-litigation dispute resolution procedures do not apply to purely common law claims.
The Third Appellate District reversed the trial court and “stayed” the action. They analyzed the legislative history of the Act and found that the pre-litigation dispute resolution provisions found there were intended to apply to “any action seeking recovery of damages arising out of, or related to deficiencies in, the residential construction…” regardless of the legal theories of recovery pled by the plaintiffs. (Elliot Homes citing Cal Civil Code § 896 [emphasis added].) Ultimately, the court ruled that all actions against builders seeking to recover damages arising out of or related to deficiencies in residential construction are subject to the Act’s pre-litigation procedures – regardless of the form of action chosen by the Plaintiff.
It is important to note, though, that while the Court criticized the holding in Liberty Mutual, there remains a split of authority within the California courts as to whether the remedies and procedures of the Act should remain exclusive. Further, the Act is not applicable to the enforcement of a contract, or any action for fraud, personal injury, or violation of a statute. [Civil Code §943(a)].