Case Name: Cilker Apartments, LLC v. Western National Construction, et al.
Case No.: 2013-1-CV-258281

This case arises out of alleged construction defects at One Pearl Place Apartments, a 182-unit residential apartment building in San Jose, California. There are seven motions before the Court: [1] Madera Framing’s Motion for Summary Judgment Against Western National Construction; [2] Madera Framing’s Motion for Summary Judgment Against Cilker Apartments, LLC; [3] Madera Framing’s Motion for Summary Judgment Against Cilker Apartments, LLC; [4] Rounds & Buroker Inc. dba Madera Construction’s Motion for Summary Judgment Against Western National Construction; [5] Rounds & Buroker Inc. dba Madera Construction’s Motion for Summary Judgment Against Cilker Apartments, LLC; [6] Courtney, Inc.’s Motion for Summary Judgment Against Plaintiff Cilker Apartments, LLC’s Second Amended Complaint; [7] Tara Coatings, Inc.’s Motion for Summary Judgment/Summary Adjudication Against Cilker’s Complaint and Western National Construction’s Cross-Complaint.

I. Objections to Evidence

Various objections to evidence have been filed in the motions before the Court. Code of Civil Procedure section 437c, subdivision (q) states:

In granting or denying a motion for summary judgment or summary adjudication, the court need rule only on those objections to evidence that it deems material to its disposition of the motion. Objections to evidence that are not ruled on for purposes of the motion shall be preserved for appellate review.

Accordingly, the Court will not rule on objections that are not deemed material to the disposition of the motions. Any objections relevant to the Court’s decision will be discussed in the analysis.

II. Requests for Judicial Notice

Requests for judicial notice have been made by the parties in each of the motions before the Court. It is unclear why the parties have requested judicial notice of these documents since the motions before the Court are summary judgment motions and the parties can simply file the documents as evidence. Indeed, the parties have done so, thereby placing all of the documents before the Court for consideration and rendering the requests for judicial notice superfluous. Accordingly, the requests for judicial notice are DENIED.

III. Madera Framing’s Motion for Summary Judgment Against Western National Construction

Madera Framing moves for summary judgment against Western National based on the argument that Madera Framing previously entered into a mutual release and settlement agreement with both Cilker and Western National. Madera Framing presents the following evidence in support of this argument.

In late 2003, Madera Framing performed framing work at the One Pearl Place project. (Separate Statement of Undisputed Material Facts in Support of Motion for Summary Judgment Against Cross-Complainant Western National Construction (“Madera Framing UMF Against Western National”), No. 8.) After its work was completed, Madera Framing was not paid. (Id. at No. 11.) On December 1, 2003, Madera Framing filed a complaint in Santa Clara County Superior Court naming Cilker and Western National. (Id. at No. 13.) The lawsuit ended in a mutual release and settlement agreement that was fully funded and executed. (Id. at No. 14.)

The mutual release and settlement agreement contains the following relevant provision:

Notwithstanding the mutual release set forth above, the Settling Parties agree to expressly except from this Agreement, and shall continue to retain any and all claims, rights and defenses concerning, responsibility for future claims by third parties for personal injury, construction defects and/or resultant property damage occurring at the Project or arising out of the work related to the Project, but only to the extent such claims arise out of conditions that were unknown to [Western National] or Cilker and not apparent by reasonable inspection as of the date this Agreement became fully executed. Each of the settling parties represent that they are currently unaware of any such claim(s) or contention(s).

(Evidence in Support of Motion for Summary Judgment Against Cross-Complainant Western National Construction, Exhibit D.)

Madera Framing contends that because Western National was a party to the mutual release and settlement agreement, the above exception regarding third parties does not apply to Western National. Madera Framing argues therefore that Western National released its claims that are now being asserted against Madera Framing in this action.

Western National argues that Madera Framing is incorrectly interpreting the language of the exception to the release. Western National contends that the “third parties” language in the exception only refers to claims for personal injury, not to claims for construction defects and/or property damage. Western National asserts that the prior lawsuit only involved a dispute over payment for Madera Framing’s work on the project and therefore the mutual release and settlement agreement only released claims related to the payment, while expressly reserving the right to pursue claims arising out of construction defects unknown at the time the agreement was executed.

As stated in the civil code: “The language of a contract is to govern its interpretation, if the language is clear and explicit, and does not involve an absurdity.” (Civ. Code, § 1638.) In interpreting an unambiguous contractual provision a court is bound to give effect to the plain and ordinary meaning of the language used by the parties. (Coast Plaza Doctors Hosp. v. Blue Cross of California (2000) 83 Cal.App.4th 677, 684.)

Although Western National contends that the “third parties” language in the exception only refers to claims for personal injury, not to claims for construction defects and/or property damage, that interpretation of the contractual language is not reasonable. A plain reading of the provision leads to the conclusion that the “third parties” language applies to the entire sentence and therefore includes claims for construction defects, which are the claims at issue in this litigation. Given this clear and unambiguous language, claims arising from construction defects are barred by the release agreement. Accordingly, Madera Framing’s motion for summary judgment is GRANTED.

IV. Madera Framing’s Motion for Summary Judgment Against Cilker Apartments, LLC

Madera Framing moves for summary judgment against Cilker based on the argument that Madera Framing previously entered into a mutual release and settlement agreement with both Cilker and Western National. This motion is essentially the same as Madera Framing’s motion against Western National on this basis.

Cilker makes similar arguments in opposition to those made by Western National, contending that it was not the intent of the parties to release future construction defect claims and that the release agreement specifically excludes such claims. Cilker points out that the underlying lawsuit did not include any construction defect claims, but only related to payment issues.

Cilker’s arguments fail for the reasons discussed in connection with Madera Framing’s motion against Western National. As stated previously, the language of the release agreement is not ambiguous and therefore there is no reason for the Court to look at evidence regarding the intent of the parties. Further, while Cilker makes much of the fact that the underlying lawsuit resolved by the release agreement did not include construction defect claims, the release agreement specifically encompasses claims that “could have been alleged” in the action. (Declaration of David Mitchell in Support of Plaintiff Cilker Apartments, LLC’s Opposition to Defendant Madera Framing, Inc.’s Motion for Summary Judgment (“Mitchell Decl.”), Exhibit 1, p. 3.) Moreover, the release agreement refers to disputes between the parties including Western National’s claims that Madera Framing and Madera Construction performed work in an “untimely, deficient and defective manner.” (Mitchell Decl., Exhibit 1, p. 1.) Consequently, as discussed in connection with Madera Framing’s motion against Western National, the unambiguous language of the release agreement bars Cilker’s claims.

Accordingly, Madera Framing’s motion for summary judgment is GRANTED.

V. Madera Framing’s Motion for Summary Judgment Against Cilker Apartments, LLC

Madera Framing has filed a second motion for summary judgment against Cilker based on the argument that Cilker’s action is time-barred by the ten year statute of limitations in Code of Civil Procedure section 337.15. In light of the Court’s ruling above, granting Madera Framing’s motion for summary judgment against Cilker based on the release agreement, this motion is MOOT.

VI. Madera Construction’s Motion for Summary Judgment Against Western National

Madera Construction moves for summary judgment against Western National based on the argument that Madera Construction previously entered into a mutual release and settlement agreement with Western National. This motion is based on essentially the same arguments as Madera Framing’s motion against Western National on this basis.

Madera Construction provides evidence that there was previous litigation between Western National, Cilker, Madera Framing, and Madera Construction. (Rounds & Buroker Inc. dba Madera Construction’s Separate Statement of Undisputed Material Facts in Support of Motion for Summary Judgment Against Western National Construction (Madera Construction UMF Against Western National”), No. 1.) In the prior litigation it was claimed that Madera Construction and Madera Framing performed work in a deficient and defective manner. (Id. at No. 2.) The prior litigation was settled and a mutual release and settlement agreement was executed. (Id. at No. 3.) Madera Framing, Madera Construction, Cilker, and Western National are each settling parties to the release agreement. (Id. at No. 4.)

As discussed in connection with Madera Framing’s motion against Western National, the unambiguous language of the release agreement bars Western National’s claims. Accordingly, Madera Construction’s motion for summary judgment against Western National is GRANTED.

VII. Madera Construction’s Motion for Summary Judgment Against Cilker

Madera Construction moves for summary judgment against Cilker based on the arguments that Madera Construction previously entered into a mutual release and settlement agreement with Cilker and that Cilker’s claims are time-barred. For the same reasons discussed previously, the unambiguous language of the release agreement bars Cilker’s claims. Accordingly, Madera Construction’s motion for summary judgment against Cilker is GRANTED.

VIII. Courtney’s Motion for Summary Judgment Against Cilker

Courtney argues that Cilker’s action is time-barred by the ten year statute of limitations in Code of Civil Procedure section 337.15. Section 337.15 provides that actions based on latent construction defects may not be brought more than 10 years after the substantial completion of the subject development or improvement. Courtney contends that Cilker cannot bring an action to recover damages from Courtney for latent defects more than ten years after Courtney substantially completed its work on the project.

Courtney provides the following evidence. Courtney is a waterproofing, roofing, and restoration contractor. (Courtney’s Separate Statement of Undisputed Material Facts (“Courtney UMF”), No. 2.) Courtney performed waterproofing work on the project. (Id. at Nos. 11-12.) Courtney finished its waterproofing work before 2003. (Id. at No. 16.) Courtney did not have a worker at the project during 2003 and, in February 2003, Western National released Courtney of its contractual duties on the project. (Id. at Nos. 18-19.) Cilker filed its action against Western National, Courtney, and other subcontractors on December 26, 2013. (Id. at No. 27.)

Courtney’s evidence demonstrates that more than ten years passed from the time Courtney completed its work on the project and the date this action was filed. Cilker argues that the ten-year limitations period begins to run from the date of “substantial completion” and that Cilker and Western National agreed that the term “substantial completion” would mean “such time as all Work has been fully performed, other than Punch List Work, and a valid Notice of Completion covering the Project has been recorded in the Official Records of, [sic] California.” (Plaintiff Cilker Apartments, LLC’s Separate Statement of Disputed and Undisputed Material Facts in Support of Opposition to Defendant Courtney, Inc.’s Motion for Summary Judgment (“Cilker Opp. to Courtney UMF”), Additional Material Facts, No. 9.) Consequently, whether Cilker’s action is timely as to Courtney turns on whether the parties could set the date of “substantial completion” by agreement.

Cilker cites to Brisbane Lodging, L.P. v. Webcor Builders, Inc. (2013) 216 Cal.App.4th 1249 in support of the proposition that the parties can agree on the “substantial completion” date. Brisbane, however, did not concern an agreement to set the substantial completion date. Rather, the parties in Brisbane simply agreed that the date of substantial completion would be the latest date on which the statute of limitation could begin to run, thereby eliminating delayed discovery. (Id. at p. 1259.) In fact, there was no dispute regarding the substantial completion date in Brisbane. (Id. at p. 1255 [“It is undisputed that the Radisson was substantially completed on July 31, 2000.”].)

While the Brisbane court found that the parties in that case could agree to waive the right to delayed discovery and effectively shorten the statute of limitations, it also noted: “To the extent there is any recognizable public policy underlying statutes of limitations, it is to limit the time within which claims may be brought, not to lengthen the time period. (Id. at p. 1262, fn. 2, emphasis in original.) Further, as noted by another case, the statute of limitations of Code of Civil Procedure section 337.15 “is different from other limitations statutes since it is meant to establish an outside limitations period.” (FNB Mortg. Corp. v. Pacific General Group (1999) 76 Cal.App.4th 1116, 1131, emphasis in original.)

Code of Civil Procedure section 337.15 states: “The date of substantial completion shall relate specifically to the performance or furnishing design, specifications, surveying, planning, supervision, testing, observation of construction or construction services by each profession or trade rendering services to the improvement.” In other words, the date of substantial completion varies from subcontractor to subcontractor depending on the work performed. By agreeing that the substantial completion date for all subcontractors shall be the date the notice of completion is recorded, Cilker and Western National are in effect lengthening the limitations period to bring claims against certain subcontractors whose work was substantially completed earlier. Cilker cites to no authority permitting this.

Cilker asserts that Courtney never completed its work on the project because it did not provide Western National with a written guarantee that would establish that its work was complete at the property, but a notice of completion for the property was recorded on May 12, 2004 (Cilker Opp. to Courtney UMF”), Additional Material Facts, No. 5), so Courtney’s work must have been completed by that date. Moreover, it is not clear why Courtney’s failure to provide a written guarantee would prevent the actual work performed by Courtney (i.e. waterproofing services) from being considered “substantially completed.” Cilker provides no evidence that Courtney ever performed any work on the project in 2003 or later, or that any other subcontractor was required to complete the work done by Courtney, so the date on which Cilker stopped working on the project must be the date of substantial completion for its work.

In sum, Courtney’s evidence shows that Cilker filed the initial complaint in this case more than ten years after the substantial completion of Courtney’s work. Cilker fails to present evidence raising a triable issue in this regard. Accordingly, Courtney’s motion for summary judgment is GRANTED.

IX. Tara Coatings, Inc.’s Motion for Summary Judgment/Summary Adjudication Against Cilker’s Complaint and Western National Construction’s Cross-Complaint

Tara Coatings argues that Cilker’s claims are time-barred. Tara Coatings argues further that if Cilker’s claims are barred, Western National therefore cannot maintain its indemnity claims against Tara Coatings. Lastly, Tara Coatings contends in the alternative that declaratory relief should be granted limiting Cilker’s recoverable damages against Tara Coatings to Tara Coatings’ available insurance policy limits.

Tara Coatings’ arguments rely for the most part on its contention that Cilker’s claims are time-barred. Tara Coatings asserts that Cilker knew of the existence of construction defects by the time of Cilker’s settlement agreement with Western National in March 2006, and that the statute of limitations (either three or four years) began to run at that time. Cilker argues in opposition that the defects at issue in this action are latent defects, subject to a ten year statute of limitations, and that it was not aware of those defects until 2013.

As explained by one case:

Sections 337.1 and 337.15 apply to actions for damages against persons involved in the construction of improvements to real property . . . and establish four-year and 10-year statutes of limitation for patent and latent defects, respectively.

. . .

The limitation periods in sections 337.1 and 337.15 start to run upon “substantial completion” of the improvement, and establish the outside limit within which an action must be filed, regardless of when the defect is discovered. That is, while the limitations period may in certain circumstances be less than the limit specified in the statute, it cannot be more. . . . Which of the two statutes applies turns on whether the defect is latent or patent. “Whether a construction defect is latent or patent depends on whether it is ‘apparent by reasonable inspection.’ (§§ 337.1, subd. (e); 337.15, subd. (b).) A patent defect ‘ “is one which can be discovered by such an inspection as would be made in the exercise of ordinary care and prudence. [Citations.] This is contrasted with a latent defect, one which is hidden and which would not be discovered by a reasonably careful inspection. [Citations.]”’ [Citations.] [¶] ‘Whether a defect is apparent by reasonable inspection is a question of fact.’ [Citations.] What constitutes a reasonable inspection ‘is a matter to be determined from the totality of circumstances of the particular case[]’ and ‘must vary with the nature of the thing to be inspected and the nature and gravity of the harm which is sought to be averted.’ [Citation.] Whether a reasonable inspection would render a defect apparent is determined in light of ‘the reasonable expectations of the average consumer.’ [Citations.]”

. . .

Discovery of a latent defect within the 10-year limitations period under section 337.15 triggers a second, shorter period under either section 337 or 338. “With judicial recognition that under some circumstances causes of action for negligence, product liability, or breach of warranty may not arise until discovery, the Legislature has responded by enacting statutes of limitation which require suit be filed within the shorter of two periods, one measured from the date of discovery and a second, longer period measured from the event giving rise to the cause of action. Section 337.15, read together with … sections 337 and 338, enacts such a two-step limitation: actions founded upon a latent defect in the development of real property must be filed within three or four years of discovery, depending on whether the action rests on breach of warranty [section 337] or negligence [section 338], but in any case within ten years of the date of substantial completion of the improvement.”

(Mills v. Forestex Co. (2003) 108 Cal.App.4th 625, 643-646, citations omitted.)

Tara Coatings provides evidence that in March 2006, Cilker entered into a settlement agreement with Western national that settled disputes over claims for Cilker’s losses attributable to poor design, delay in construction, defective work, and cost overruns in an amount estimated to exceed $14,000,000. (Defendant/Cross-Defendant Tara Coatings, Inc.’s Separate Statement of Undisputed Material Facts in Support of Motion for Summary Judgment and/or Adjudication (“Tara UMF”), II., No. 7.) Tara Coatings also provides evidence that, based on work order log and service requests, Cilker was on notice as early as 2004 about potential water intrusion/damage building issues. (Tara UMF, IV., No. 4.)

Tara Coatings’ evidence shows that Cilker had knowledge of certain potential defects. However, the fact that the settlement agreement referenced defective work does not establish that Cilker knew of the specific defects at issue in this lawsuit. Cilker provides evidence that it did not learn of the defects at issue in this litigation until 2013 when destructive testing was performed. (Plaintiff Cilker Apartments, LLC’s Separate Statement of Disputed and Undisputed Material Facts in Support of Opposition to Defendant Tara Coatings, Inc.’s Motion for Summary Judgment and/or Summary Adjudication (“Cilker Opp. to Tara UMF”), II., No. 4.) Cilker had no knowledge of water instruction issues at exterior walkways, window assemblies, sliding glass doors, and French doors at private balconies, or issues with drainage at elevated walkways or at the podium level of the property. (Ibid.) Further, the information contained in work order logs and customer service request forms related to routine maintenance issues that were resolved by Cilker’s property management company; nothing in the documents would have caused Cilker or the property management company to reasonably suspect there were more serious conditions present at the property. (Ibid.)

Cilker’s evidence is sufficient to raise a triable issue of material fact as to whether all of the alleged defects at issue in this lawsuit were apparent prior to 2013. If they were not apparent, they would be considered latent defects, subject to a ten year limitations period, and Cilker’s lack of knowledge of the defects means that no shorter statute of limitations period would be triggered. Consequently, there is a triable issue of material fact as to whether Cilker’s claims are time-barred. Therefore, there is also a triable issue of material fact as to whether Western National can maintain its indemnity claims against Tara Coatings.

With regard to Tara Coatings’ argument regarding the limitation of Cilker’s recoverable damages against Tara Coatings to Tara Coatings’ available insurance policy limits, Cilker has not asserted any claims for declaratory relief (and neither has Tara Coatings), so it is not clear what basis there would be for the Court to decide in the abstract that damages should be limited. To the extent Tara Coatings is referring to the declaratory relief causes of action asserted by Western National, any order limiting damages based on those causes of action would not dispose of an entire cause of action and would therefore be improper. (See Code Civ. Proc, § 437c, subd. (f)(1).)

In sum, for the reasons discussed above, Tara Coatings’ motion is DENIED.