2017-00223401-CU-CD

Ryan Young vs. Taylor Morrison of California, LLC

Nature of Proceeding: Motion to Stay Action and Compel Compliance

Filed By: Ganion, James M.

Defendants Taylor Morrison of California, LLC, et al.’s (collectively “Taylor”) motion to stay action and compel compliance with contractual right to repair is denied.

Taylor’s requests for judicial notice are granted.

The Court declines to consider Plaintiffs’ “surreply.” There is no provision in the Code of Civil Procedure allowing for such a filing. In any event, the points raised in the “surreply” do not change the result of this ruling.

In this construction defect action, Taylor moves to stay the action and compel the Plaintiffs to comply with the construction defect resolution procedures in the purchase agreements for the subject homes.

SB 800 sets forth a uniform set of construction standards (Civ. Code § 896), and permits claimants to “make a claim for a violation of standards” by alleging that the “home does not meet the applicable standard.” (Civ. Code, sec. 942.) Further, SB800 provides builders with an absolute right to investigate (Civ. Code, sec. 916(a), (c)), repair (Civ. Code § 918), or compromise (Civ. Code § 929(a)) any claimed violation of SB800’s standards. Claimants subject to these provisions must comply with the pre-litigation procedure set forth therein, as an absolute precondition to commencing litigation for a claimed violation of a building standard. (Civ. Code § 910(a); Standard Pacific Corp. v. Superior Court (2009) 176 Cal.App.4th 828, 832-833.) Plaintiffs have the burden to show why they should not be required to comply with SB800. (Id., at p. 834.)

The Legislative purpose of the Right-to-Repair statutory framework was to promote the “prompt and fair resolution of construction claims” and to “improve the procedures for the administration of civil justice, including standards and procedures for early disposition of construction defect claims.” (See, §1 of Stats. 2002, c. 722 (SB800), emphasis added.)

The pre-litigation procedure is a mandatory process prior to the filing of a construction defect action. Civil Code § 910, et seq., applies to any “action against any party alleged to have contributed to a violation of the standards set forth in Chapter 2.” Chapter 2 includes both §§ 896 and 897. Accordingly, the pre-litigation process is mandatory whenever a party is alleging any of the specifically enumerated defects set forth in Civil Code § 896 or claiming any construction defect which is alleged to have resulted in damage (Civil Code, § 897).

As noted, SB800 enacted as Civil Code § 895, et seq., established pre-litigation procedures in construction defect cases. These procedures require the homeowner to give the builder notice of any alleged defect and an opportunity to repair them before the homeowner may file a construction defect action against the builder. The procedures also provide for mediation. (Civ. Code §§ 910-938.)

Civil Code § 914 permits a builder to establish its own contractual non-adversarial inspection and repair procedures in lieu of the notice and repair procedures in §§ 910, et seq. To that end, if the builder establishes its own nonadverarial contractual procedures it may not also require adherence to the statutory procedures set forth in SB800 regardless of whether builder’s own procedures are successful or ultimately deemed unenforceable. (Civ. Code § 914.) Generally, at the time the sales agreement is executed [no later than the close of escrow], the builder must notify the homeowner whether the builder intends to engage in the nonadversarial procedures of SB800 or attempt to enforce alternative contractual provisions. If the builder elects to use the alternative nonadversarial contractual provisions in lieu of SB800, the election is binding regardless of whether the builder’s alternative nonadversarial contractual provisions are successful in resolving the ultimate dispute or are ultimately deemed unenforceable. (Id.)

In the instant case, Taylor opted out of the statutory procedures of Civil Code §§ 910 et seq. and established its own nonadversarial notice and repair procedures. Taylor contends that Plaintiffs have not permitted Taylor to inspect the subject homes and prevented Taylor from determining whether to offer to repair the homes.

Taylor contends that the notices which Plaintiffs served were insufficient in detail and did not allow them to exercise the contractual right to inspect and repair the subject homes. To that end, they point to the fact that Plaintiffs served 17 virtually identical Notices of Claim pursuant to Civil Code § 910. Taylor responded to the Notices of Claim by indicating that they did not contain the reasonably “sufficient detail to determine the nature and extent” of each violation as required by Civil Code § 910(a). Taylor’s counsel indicates that it initially responded that the claims did not comply with the statutory procedures because it had not obtained copies of the subject purchase agreements making clear that Taylor had opted out of SB800. The parties, through discussion between counsel regarding the Notices, learned that Taylor had opted out of SB800. Taylor continued to assert that the Notices were insufficient, not under SB800 but rather under the nonadversarial contractual provisions regarding notice and repair because they did not explain the defects in any detail and that the absence of detail prevented it from meaningfully inspecting the homes. Plaintiffs offered to allow Taylor to inspect the homes but Taylor declined to do so given its insistence that the Notices were insufficient to allow it to adequately inspect the homes.

At base, this motion seeks an order staying this action so that Plaintiffs can serve a more detailed Notice. An asserted basis for the motion is Civil Code § 930(b) which provides that where the “claimant does not conform with the requirements of this chapter, the builder may bring a motion to stay any subsequent court action or other proceeding until the requirements of this chapter have been satisfied.” (Civ. Code § 930(b) [emphasis added].)

This section, however, provides no basis for the instant motion as Taylor expressly opted out of SB800. Indeed, where, as here, the builder has established its own nonadversarial procedures, that election is binding. (Civ. Code § 930(b).) The builder who opts out cannot require “adherence to the nonadversarial procedures set forth in this chapter…” (Civ. Code § 914(a) [emphasis added].) “[A] builder who opts out of the Chapter 4 nonadversarial statutory prelitigation procedures in favor of its own contractual procedures opts out of the entirety of Chapter 4…” (Baeza v. Superior Court (2011) 201 Cal.App.4th 1214, 1226 [emphasis edded].) Parenthetically, in Baeza, the court of appeal held that a builder who opted out of the non adversarial statutory

prelitigation procedures of Civ. Code, §§ 910-938, in favor of its own contractual procedures opted out of the entirety of §§ 910-938, and the disclosure provisions of Civ. Code, § 912 did not apply to such a builder. Civil Code § 930(b) is a part of Chapter 4 of the nonadversarial statutory prelitgation procedures and thus Taylor cannot invoke that section as a basis for staying the action.

Taylor’s arguments to the contrary are not persuasive. It is true that Civil Code § 914, which is in Chapter 4 allows the builder to opt out of the statutory procedures in Chapter 4 and that § 930(b) discusses compliance with the requirements of Chapter 4. But that reference in § 930 quite plainly refers to the nonadversarial procedures required by Chapter 4, not any contractual procedures when a builder opts out of the requirements of Chapter 4. The authority cited by Taylor does not change the result. ( The McCaffrey Group, Inc. v. Superior Court (2014) 224 Cal.App.4th 1330.) That case did not, as Taylor claims, state that § 930(b) applies to a contractual nonadversarial procedure such that a builder may move for a stay when the builder has opted out of SB800. Rather McCaffrey dealt with a motion to compel ADR compliance in purchase contracts where the builder had opted out of SB800 and the purchase contracts contained language that stated that where any party breached the agreement not to commence a lawsuit without first complying with the ADR procedures, the other party could commence an action seeking to compel compliance with the agreement. (Id., at 1335, fn. 3.)

The Court would agree, however, that Civil Code § 915 does seem to contemplate that even where the builder has opted out of SB800, a civil action should not be filed until the builder’s alternative contractual procedures are followed. To that end, that section states that a homeowner may proceed with the filing of an action “at the conclusion or cessation of an alternative nonadversarial proceeding.” (Civ. Code § 915.)

Again, as set forth above, Taylor initially sought to require Plaintiffs’ to comply with the notice requirements set forth in SB800 because it claims it did not have the actual purchase agreements showing that it had opted out of SB800. Up until November 2017, Taylor was insisting that Plaintiffs comply with the requirements of SB800. Specifically, Taylor cited to Civil Code § 910(a) which provides that the requisite notice under SB800 “shall describe the claim in reasonable detail sufficient to determine the nature and location, to the extent known, of the claimed violation.” (Civ. Code § 910

(a).) However, by opting out of SB800, Taylor cannot compel Plaintiffs to comply with the requirements of SB800 and its own contractual nonadversarial procedures. ( Anders v. Superior Court (2011) 192 Cal.App.4th 579, 589-590.)

Rather the notice provision in the purchase agreements states that Plaintiffs must simply provide “written notice of any matters relating to a dispute as soon as reasonably possible….” (Nall Decl. Exh. B p.10 ¶ Q.) It is only this provision that

Taylor can seek to enforce given its binding election to opt out of the SB800 process. Although Taylor cannot seek to compel Plaintiffs to comply with the requirements of SB800, including any specific notice requirements set forth in Civ. Code § 910(a), Taylor is only seeking to compel Plaintiffs to comply with the contractual procedures, not SB800. The fact that Taylor initially attempted to have Plaintiffs comply with SB800 before it obtained the purchase contracts does not, as Plaintiffs argue, preclude Taylor from now seeking to enforce compliance with the contractual procedures and none of the cases stand for that proposition. The cases simply make clear that where the builder has opted out of SB800 and sought to compel compliance with the contractual procedures and attempted to enforce them through a motion to compel, it

could not thereafter seek to have the homeowners comply with SB800 if the contractual procedures were found unenforceable. (Anders, supra, 192 Cal.App.4th at 590-594.) That is not the case here. Taylor mistakenly cited to SB800 but once it obtained the purchase agreements, it sought to have Plaintiffs comply with the contractual provisions and has brought a motion to enforce the contractual provisions.

Saliently, the relevant provision governing the notice that must be provided states that Plaintiffs must provide “written notice of any matters relating to a dispute as soon as reasonably possible…” (Nall Decl. Exh. B p.10 ¶ Q.) To that end, Taylor, with little to no analysis of the Notices which it claims are deficient, argues that the Notices provided were “akin to a patient complaining to a general surgeon that she does not feel well, but not saying where or how and expecting the surgeon to stroll into the operating room, open her up and figure it out.” (Mot. 8:7-9.) This metaphor provides no instructive analysis. Taylor entirely fails to discuss any of the Notices and fails to demonstrate how they are insufficient. Indeed, as seen in opposition, certain Notices with respect to some of the homeowners indicated that there were gaps and water intrusion at the front door, problems with the garage man door and rear sliding door, and damage to the garage man door casing in terms of water damage and splitting. (Kirkland Decl. ¶ 18, Exh, 12 [Notices for Plaintiffs Banguara/Eabisa].) The Notices also indicate stucco cracking in the exterior walls “running diagonally at re-entrant corners of windows and doors” and “running horizontally in the field in the left, right, and rear elevation walls.” (Id.) These are but a few examples, and the Notices were approximately 9 pages long and set forth numerous examples of claimed defects in reasonable detail. In many instances specific locations are identified. The Court is not persuaded that Plaintiffs were, in refusing to provide a more specific notice, attempting to preclude Taylor from conducting an inspection. Indeed, Plaintiffs specifically made the subject homes available for inspection and offered to have personnel available at the inspection to explain the Notices. (Id. ¶ 13, Exh, 8.) The Court is simply not persuaded that Taylor’s experts would not be able to inspect the homes based on the Notices which were only required to provide “written notice of any matters relating to a dispute as soon as reasonably possible…” To the extent that Taylor desired a higher level of specificity be set forth in any notice, it could have easily said so in the purchase agreement. It did not and the Court will not now require more than what was set forth in the agreement. To do so would effectively and retroactively rewrite the agreement.

In reply, Talyor attempts, for essentially the first time, to discuss the specific contents of the Notices in an attempt to demonstrate that they are insufficient. The Court rejects this attempt. As pointed out in the previous paragraph, Taylor’s moving papers offered little to no analysis on the deficiency of the Notices. The Court would simply not that while the reply points out certain examples where more detail could possibly been provided, as discussed above, the Notices contain sufficient detail.

The Court simply finds that the Notices here were sufficient under Taylor’s contractual provisions.

The Court would note that even if Taylor had not opted out of SB800 that Plaintiffs have complied with the notice requirements under that scheme as well. That is, the Notices at issue describe the claim in “reasonable detail sufficient to determine the nature and location, to the extent known, of the claimed violation.” (Civ. Code § 910 (a).)

The parties disagree as to whether the nonadversarial contractual procedures in the purchase agreements are binding on subsequent purchasers. Given the Court’s finding above that the Notices were sufficient, the Court need not resolve this issue because even if the procedures were binding, the Notices were sufficient.

The Court, however, rejects Taylor’s claim in reply, that the subsequent purchasers can also be required to comply with the separate notice and repair requirements in the CC&Rs. Taylor did not seek to compel compliance with the CC&Rs in the moving papers and cannot do so for the first time in reply.

Given the above, the Court also need not address Plaintiffs’ contention that the alternate contractual procedures are unconscionable.

The Court rejects Plaintiffs’ argument that Taylor only submitted evidence of the purchase agreement for one of the 17 owners and failed to show that the contracts for the other 16 homes were identical. The Court disagrees. Taylor’s custodian of records specifically declared that the purchase agreements used for the subject homes were in the same form and format for each purchaser. (Nall Decl. ¶ 2.) Moreover, in reply, all contracts were provided and they are the same. (Gravitt Supp. Decl. Exh. E.) The Court rejects Plaintiffs’ “surreply” objecting to the supplemental declaration which merely confirmed the identical nature of the purchase agreements.

In short, the Court finds that the underlying basis for Taylor’s motion, specifically, that Plaintiffs’ Notices have prevented it from inspecting the homes in accordance with its nonadversarial contractual provisions lacks merit. Indeed, the Court found that the Notices were sufficiently specific.

At the end of the day, Taylor’s refusal to conduct an inspection and demanding more specific notices therefore constituted a refusal to comply with the contractual procedures thereby excusing Plaintiffs from any further compliance with those procedures prior to initiating a civil action. Indeed, Taylor essentially conceded in reply that Plaintiffs would defeat this motion if they demonstrated that the notices were sufficient [“After all, specific detailed notices, provided in good faith, would be the strongest argument for them to make in order to defeat the Motion.”]. (Reply 3:12-14.) As discussed above, they did. Therefore the instant action may proceed.

The Court also need not address the point raised in reply by Taylor that four (4) of the plaintiffs in this action were already named as plaintiffs in a different construction defect action against Taylor filed by another law firm. In any event, Plaintiffs are dismissing these 4 plaintiffs.

The motion to stay is denied.