Case Name: Spyglass Hill Owners Association vs. Taylor Morrison of California, LLC, et al.
Case No.: 1-12-CV-225200

This is a construction defect action by plaintiff Spyglass Hill Owners Association (“Plaintiff”) in connection with the Spyglass Hill Condominiums in San Jose, California (the “Subject Property”). According to the operative First Amended Complaint (“FAC”) filed on June 25, 2012, Plaintiff is a non-profit mutual benefit corporation that serves as the homeowners association for the Spyglass Hill Condominiums. Defendant Taylor Morrison of California, LLC (“TMC”) is the successor in interest to Taylor Woodrow Homes (“TWH”), and TMC and/or TWH and/or Taylor Morrison Services, Inc. (“TMS”) were the owners, builders and developers of the Spyglass Hill Condominiums.

Plaintiff’s allegations of defects include: (1) improperly installed gutters resulting in damage; (2) improperly installed roof systems; (3) improperly installed stucco systems; (4) improperly installed substrates; (5) improperly installed and applied paint and primer; (6) improperly installed or omitted flashings; (7) improperly installed building paper; (8) improperly installed iron railings; (9) improperly installed windows and/or defective window products; (10) improperly installed steel doors; (11) improperly sloped concrete and wood surfaces at decks and patios; (12) improperly installed elastomeric coatings; (13) gypsum wallboard is incomplete and gypsum fasteners were not sealed; (14) improperly installed air conditioning units; (15) improperly installed hot water heaters; (16) improperly installed temperature pressure relief lines; (17) improperly installed plumbing; (18) improperly installed metal fences; (19) excessive differential slab movement; and (20) improperly installed subgrade waterproofing and other deficiencies present known and unknown.

The FAC asserts four causes of action for: (1) violation of Civil Code section 895 et seq.; (2) violations of governing documents (Civil Code section 1354); (3) breach of fiduciary duty; and (4) breach of contract.

Plaintiff now moves for leave to file a Second Amended Complaint (“SAC”) that adds three causes of action for strict liability, negligence, and breach of implied warranty. Plaintiff argues that the purpose of the amended pleading is to add common law claims for construction defects that have caused property damage pursuant to Liberty Mutual Ins. Co. v. Brookfield Crystal Cove, LLC (2013) 219 Cal.App.4th 98. Plaintiff contends that under Liberty Mutual, the Right to Repair Act (Cal. Civ. Code, § 895 et seq. or “SB 800”)) does not preclude common law claims for construction defects that have caused property damage. Plaintiff argues Defendants will suffer no prejudice as a result of the filing of the SAC because trial is not set until June 29, 2015, and Defendants will have ample time to complete discovery or challenge the new causes of action. Plaintiff argues it will be prejudiced if it is not allowed to present common law remedies at trial. The motion is supported by the Declaration of Aaron D. Zimmerman attaching copies of the FAC and proposed SAC.

In opposition, defendant TWH, by its successor in interest TMC (collectively “Taylor”) argues the motion should be denied because the proposed new causes of action are duplicative and unnecessary as they seek the same remedies as the causes of action already alleged in the FAC. Taylor argues Liberty Mutual is distinguishable because it did not involve a contractual alternative dispute resolution process as in this case. According to Taylor, the parties are bound by section 7.6 of the Declaration of Covenants, Conditions and Restrictions (“CC&Rs”) for the Subject Property, which sets forth the applicability of SB 800. Thus, Taylor argues that Plaintiff is contractually obligated to follow the exclusivity provisions of Civil Code section 943. Taylor cites The McCaffrey Group, Inc. v. Superior Court (2014) 224 Cal.App.4th 1330 for the position that the contractual SB 800 provisions for handling of construction defect claims set forth in purchase and sale agreements and CC&Rs are binding and enforceable. Finally, Taylor argues that the addition of new causes of action will require Taylor to conduct additional discovery and increase the number of pre-trial motions, motions in limine and jury instructions, all to Taylor’s prejudice.

Judicial Notice

Taylor requests judicial notice of the Declaration of Covenants, Conditions and Restrictions of Spyglass Hill Owners Association, Exhibit 1 to the Request for Judicial Notice.

The request is not opposed. The CC&R declaration shows on its face that it was recorded with the Santa Clara County Recorder on April 25, 2005. Judicial notice of recorded documents such as Plaintiff’s CC&Rs is permitted. (See Alfaro v. Community Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1367, fn. 8 [taking judicial notice of “the covenants, conditions, and restrictions” under Cal. Evid. Code § 452, subds. (c) and/or (h)]; Palacin v. Allstate Ins. Co. (2004) 119 Cal.App.4th 855, 862 [unopposed judicial notice of CC&Rs].) The request is GRANTED.

Discussion

Judicial policy favors resolution of all disputed matters between the parties in the same lawsuit, and thus, the court’s discretion on allowing leave to amend will usually be exercised liberally to permit amendment of pleadings. (See Nestle v. Santa Monica (1972) 6 Cal.3d 920, 939.)

“Although courts are bound to apply a policy of great liberality in permitting amendments to the complaint at any stage of the proceedings, up to and including trial, this policy should be applied only ‘[w]here no prejudice is shown to the adverse party. …’ [Citations.]” (Atkinson v. Elk Corp. (2003) 109 Cal.App.4th 739, 761.)

Furthermore, “‘even if a good amendment is proposed in proper form, unwarranted delay in presenting it may—of itself—be a valid reason for denial.’” (Record v. Reason (1999) 73 Cal.App.4th 472, 486.)

Taylor complains that the proposed amendment comes three years into the case. However, Plaintiff explains that the request to add common law causes of action is based on the Liberty Mutual decision, which was issued in August of 2013. Thus, the timing of Plaintiffs’ motion for leave is warranted.

Taylor fails to demonstrate any prejudice from the proposed amendments. In the context of amended pleadings, “[p]rejudice exists where the amendment would require delaying trial, resulting in loss of critical evidence or added costs of preparation, increased burden of discovery, etc.” (Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2012) ¶ 6:656, citing Magpali v. Farmers Group, Inc. (1996) 48 Cal.App.4th 471, 486-488.) Here, the June 2015 trial date is not imminent, and Taylor does not contend that the proposed amendment will require delaying trial. Taylor complains that it will have to conduct additional discovery and pre-trial motions in connection with the new causes of action, but this does not constitute prejudice that would justify denying leave to amend.

Taylor’s arguments regarding SB 800 exclusivity and The McCaffrey Group case should be presented in a demurrer or other appropriate motion once the SAC is filed.

The motion for leave to file the SAC is GRANTED.