Defendant KB Home South Bay (“KB Homes”) hereby moves to dismiss the Plaintiffs’ Complaint or, in the alternative, to Stay the Action.  The subject action is a construction defect lawsuit brought by twenty three owners of single family homes located in the Del Rosa at Miramonte project in San Jose and one owner of a single family home located in the North Haven project in San Jose.  KB Home was the builder and developer of the  projects at issue in

this litigation.  The subject Complaint includes seven causes of action and was filed on Jan. 31, 2014.  KB Home now seeks to dismiss or, in the alternative, stay the litigation pending completion of prelitigation claims procedures as set forth in its Limited Warranty Agreement, Right to Repair Addendum, Notice of Non-Adversarial Procedure and other documents provided to the buyers and signed or initialed at the time of sale.  Defendant’s moving papers point out that certain plaintiffs did not initiate the prelitigation procedures (“Non-Compliant Plaintiffs”), some initiated the procedure but did not complete it )”Partially Compliant Plaintiffs”) and some abandoned the prelitigation procedures (“Removed Claimants”).

 

KB Homes argues in its moving papers that the Right to Repair Addendum to the Purchase Agreement and Escrow Instructions is specifically incorporated into each owner’s Purchase Agreement and that the Addendum specifically states that the prelitigation procedures set forth in Civil Code Section 895 are binding on all buyers and their successors in interest.  As to successors, the Notice of Non-Adversarial Procedures is recorded on the property and is to “run with the land.”  KB Home further argues that the plaintiffs agreed in writing to undertake and complete the prelitigation procedure described in CC 895 et seq. before filing an action for construction defects and effectively breached the Purchase Agreement contract by not fulfilling this requirement under the Agreement.

 

In their Opposition, Plaintiffs argue (1)KB Home made no election under CC 914(a) and therefore, the only prelitigation procedure it could ever enforce is the statutory prelitigation procedure set forth in Civil Code Sections 910 through 938; (2) Since Plaintiff did not bring a claim for violation of SB800, Defendants have no basis to enforce the procedure upon them; and (3) Even if the procedure applies, KB Homes has no legal authority to seek dismissal of the action.  Plaintiffs cite the case of Liberty Mutual Insurance Co. v. Brookfield Crystal Cove LLC (2013)219 Cal.App.4^th 98 in support of its position that SB800 is not the exclusive remedy for homeowners and that persons seeking to recover damages for defects that resulted in physical damage to their homes may bring common law causes of action for negligence and strict liability in addition to or instead of an action under SB800.

 

In its Reply Memorandum, KB Home argues that Plaintiffs Section 914 argument is erroneous and illusory because the documents set forth the statutory requirements set forth in CC 895 et seq. and many of the plaintiffs actually served a Notice of Claim pursuant to CC 895 prior to filing suit and some even secured repairs and therefore have waived the right to claim that they are not subject to those requirements.

 

 

 

 

The Right to Repair Act, California Civil Code section 895 et seq., sets forth various standards for residential constructions and procedures for construction defect actions brought under the Act.

 

In any action seeking recovery of damages arising out of, or related to deficiencies in, the residential construction, design, specifications, surveying, planning, supervision, testing, or observation of construction, a builder, and to the extent set forth in Chapter 4 (commencing with Section 910), a general contractor, subcontractor, material supplier, individual product manufacturer, or design professional, shall, except as specifically set forth in this title, be liable for, and the claimant’s claims or causes of action shall be limited to violation of, the following standards, except as specifically set forth in this title.

 

(Cal. Civ. Code, § 896.)  The construction standards set forth in section 896 pertain to water issues (subd. (a)), structural issues (subd. (b)), soil issues (subd. (c)), fire protection issues (subd. (d)), plumbing and sewer issues (subd. (e)), electrical system issues (subd. (f)), and other areas of construction (subd. (g)).  The Act also includes “a requirement that builders provide a one-year ‘fit and finish’ warranty (§ 900), and it established a new 10-year statute of limitations (§ 941).  These provisions clearly benefit homeowners.”  (Standard Pacific Corp. v. Superior Court (2009) 176 Cal.App.4th 828, 832.)

 

The Act establishes pre-litigation procedures that a claimant must initiate prior to filing an action for violation of these standards (Civ. Code, § 910).  “These procedures include a requirement that the claimant provide notice of claim ‘to the builder.’  ([Cal. Civ. Code, § 910], subd. (a).)  (Greystone Homes, Inc. v. Midtec, Inc. (2008) 168 Cal.App.4th 1194, 1211.)  “The builder may elect to respond to the claim by inspecting the alleged violation (§ 916), offering to repair it (§ 917), and either repairing the violation, or arranging for a repair to be done (§§ 918, 921).  If the builder fails to respond to the claim, or otherwise fails to comply with the requirements of the Act’s prelitigation procedures, the claimant may bring an action for a violation of the Act’s standards without further resort to the prelitigation procedures.  (§§ 915, 920.)  A claimant may also file an action for a violation of the Act’s standards alleging an inadequate repair.  (§ 927.)”  (Greystone Homes, supra, 168 Cal.App.4th at p. 1211.)  “If 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.  The court, in its discretion, may award the prevailing party on such a motion, his or her attorney’s fees and costs in bringing or opposing the motion.” (Cal. Civ. Code, § 930, subd. (b).)

 

The Act applies only to new residential units where the purchase agreement with the buyer was signed by the seller on or after January 1, 2003.  (See Civ. Code, § 938.).  In the Opposition, Plaintiffs do not argue or allege that they have satisfied the condition of the Act, but rather argue that the Act is not the exclusive remedy given the common law allegations in the Complaint based upon the Liberty Mutual holding.  In Liberty Mutual, supra, the Court of Appeal (4th App. Dist., Div. 3) reversed the dismissal of an insurer’s subrogation action against a housing developer for recovery of the insured’s relocation expenses incurred while the house was being repaired.  The Liberty Mutual court examined the language and legislative history of the Act and found that “the Right to Repair Act does not expressly or impliedly support an argument that it mandates an exclusive remedy, and certainly does not derogate common law claims otherwise recognized by law.  [Citation.]”  (Liberty Mutual, supra, 219 Cal.App.4th at pp. 108-109.)  The particular discussion of the Act’s history and purpose was in regard to the Act’s abrogation of the “economic loss rule” in residential construction defect cases:

 

In Aas v. Superior Court (2000) 24 Cal.4th 627, 632 [101 Cal. Rptr. 2d 718, 12 P.3d 1125], the California Supreme Court held that construction defects in residential properties, in the absence of actual property damage, were not actionable in tort.  The plaintiffs in Aas v. Superior Court contended that their homes suffered a variety of construction defects, and sought as damages from the homebuilders the costs of repair and/or the diminution in the value of their homes.  [Citation.]  The trial court excluded evidence of any defects that had not caused property damage; both the Court of Appeal and the Supreme Court upheld that evidentiary ruling. [Citation.]

 

In 2002, the California Legislature enacted the Right to Repair Act. A key specified goal of the Act was to abrogate the holding of Aas v. Superior Court.  “In response to the holding in Aas, the Legislature enacted Civil Code section 895 et seq.”  [Citation.]  The legislative history of the Act explained: “This bill would make major changes to the substance and process of the law governing construction defects.  It is the product of extended negotiations between various interested parties.  Among other things, the bill seeks to respond to concerns expressed by builders and insurers over the costs associated with construction defect litigation, as well as concerns expressed by homeowners and their advocates over the effects of a recent Supreme Court decision that held that defects must cause actual damage prior to being actionable in tort [Aas v. Superior Court, [supra,] 24 Cal.4th 627]. [¶] … [¶] … [E]xcept where explicitly specified otherwise, liability would accrue under the standards regardless of whether the violation of the standard had resulted in actual damage or injury.  As a result, the standards would essentially overrule the Aas decision and, for most defects, eliminate that decision’s holding that construction defects must cause actual damage or injury prior to being actionable.”  [Citations.]

 

(Id. at pp. 103-104.)  The Liberty Mutual court held that “the Act does not provide the exclusive remedy in cases where actual damage has occurred because of construction defects.  Therefore, Liberty Mutual’s subrogation claims were not time-barred for failing to comply with the Act.”  (Id. at p. 109.)

 

 

In the immediate case, the Court finds that it would be neither equitable nor fair to abrogate the pre-litigation requires of Section 895 simply because the Plaintiffs have included common law claims.  As noted by Defendant, the Complaint includes claims for Breach of Express Warranty and Breach of Contract seeking damages for construction defects.  Furthermore, it is undisputed that many of the Plaintiffs actually initiated the pre-litigation procedures but did not complete the process thereby taking some of the wind out of Plaintiffs “ambiguity” argument. It would undermine the purpose of SB800 and invite gamesmanship in pleadings if Defendants were not able to employ the prelitigation requirements prior to the inception of full blown litigation.  Clearly the intent of the documents signed by the Plaintiffs was to provide Defendant an opportunity to invoke the procedures set forth in CC 895 et seq.  With that said, the Court does not find that dismissal of the action is an appropriate remedy nor does it deny Plaintiffs the opportunity and right to litigate their common law claims, if resolution can not be reached.  Accordingly, the Court hereby DENIES the Motion to Dismiss, but in the alternative, GRANTS the Motion to Stay until the pre-litigation procedures set forth in CCP 895 et seq. are completed.