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Homebuilder Wins Important Appellate Victory in SB 800 Case

December 4, 2012

Armundo Darling, et al. v. Superior Court

(Western Pacific Housing, Inc., Real Parties in Interest)
A135747
November 16, 2012

California’s right to repair statute, SB 800, went into effect on January 1, 2003.  Since that time, SB 800 has gone largely untested in the judicial system, leaving the parties to dispute almost every aspect of the statutory framework.

Last week, the California Court of Appeals handed down a huge victory for home builders.  In a case of first impression, the court affirmed the clear legislative intent and purpose of SB 800: providing a builder notice and the right to repair prior to a homeowner initiating construction defect litigation.

Since the statutory scheme was enacted, plaintiff firms have attempted to “game the system” by making document requests to the home builder which are burdensome, harassing and otherwise constitute an unabated fishing expedition in the search for construction defect claims.  This case provides powerful language and guidance for all parties.  Wood, Smith, Henning & Berman has represented Western Pacific Housing, Inc. (“WPH”) since the inception of this matter and through the appellate process.

Background

The Plaintiffs in this case are owners of 86 single family homes in Solano County.   All homes were first sold after January 1, 2003, and are, therefore, subject to the alternative dispute procedures of SB 800.  These procedures require, among other things, that claimants serve builders with a Notice of Claim and permit inspections and repairs prior to filing a construction defect action.  On February 24, 2011, Plaintiffs served a document demand on WPH pursuant to section 912(a), but did not serve a Notice of Claim or comply with any other SB 800 procedures.  WPH did not produce documents in response to the premature demand.  Plaintiffs then filed a complaint for alleged construction defects against WPH on April 5, 2011.

After WPH’s demurrers  to Plaintiffs original and First Amended Complaints were sustained, Plaintiffs filed a Second Amended Complaint.  WPH filed a Motion to Stay pursuant to section 930(b), arguing that Plaintiffs never served a Notice of Claim, nor did they comply with other alternative dispute procedures outlined in SB 800.  Plaintiffs asserted that they served a demand for documents on WPH, that the demand was not satisfied, and that this resulted in Plaintiffs’ release from SB 800.  WPH argued that the document demand was premature and invalid, since Plaintiffs were first required to initiate the SB 800 process by serving a Notice of Claim.

The trial court agreed with WPH’s reading of SB 800.  Specifically, it ruled that claimants must initiate the SB 800 procedure by serving a Notice of Claim before they are entitled to seek documents.  Therefore, the court granted WPH’s Motion and stayed the action pending Plaintiffs’ compliance with SB 800.

 Plaintiffs filed a Petition for Writ of Mandate to the California Court of Appeal , arguing that the trial court erred in its ruling.  The Petition presented the following question of first impression: must homeowners first serve a Notice of Claim under section 910(a) before a builder is obligated to respond to any document request under section 912(a)?

Holding

The Court of Appeal agreed with WPH and the trial court and, therefore, denied Plaintiffs’ Petition.

The Court reviewed the history and purpose of SB 800, the statutory language, and legislative intent.  It examined the structure of the alternative dispute prelitigation process which is contained in Chapter 4 of SB 800.  The Court observed that Chapter 4 begins with the Notice of Claim provision at section 910.  The Court also observed that the document demand provision – section 912 – appears later in Chapter 4.  Importantly, the court noted that section 910 “initiates” the pre-litigation procedure and has the same force and effect as a “notice of commencement of a legal proceeding.”

The Court concluded as follows: “Because the document request is part of the prelitigation procedure, and the prelitigation procedure does not begin until the homeowner has served notice of a claim, it follows that there can be no prelitigation obligation to produce documents under section 912, subdivision (a) unless the homeowner has commenced the prelitigation procedure by serving notice of a claim.”

The court noted that section 912 does provide for the disclosure of certain documents prior to the service of the Notice of Claim.  However, these documents are specific sales-related materials that are provided at the time of purchase.  Therefore, they represent an insular exception to the general rule that duties appearing later in Chapter 4 only become mandatory after claimants serve a Notice of Claim.

Significance

This holding strengthens the absolute right to repair that was intended by SB 800.  Builders will not be required to open their books to unlimited homeowners who may have no legitimate claim for construction defects.  As the court noted, the purpose of SB 800 was not to “empower homeowners to get documents from builders whether they have a defect claim or not.”  Instead, homeowners must first articulate and provide notice of their claims.  Then, builders have the ability to decide the best way forward.  If the claims appear meritorious and timely, they can proceed with inspections and repairs as permitted by SB 800.  If not, they can enter litigation and fight the claims there.  This ruling protects the builder’s right to make this determination based on the initial Notice of Claim.  As such, the ruling will encourage the prompt and efficient resolution of construction defect claims in the manner intended by SB 800.

 

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