Judge Stephen Morgan, Case Number: 23AVCV00523, Date: 2023-10-31 Tentative Ruling

This is a breach of contract action. Plaintiffs Eugene Jones (“Eugene”)[1] and Jamie Jones (“Jamie” and collectively “Plaintiffs”) present that the subject of this action is real property commonly known as 44223 Shiloh Lane, Lancaster, CA 93535 (the “Subject Property”). Plaintiffs allege that on or about July 01, 2019, they purchased the Subject Property and were told by a representative from Defendants KB Home, erroneously named as KB Home, Inc.; KB Home Greater Los Angeles, Inc.; KB Home Sales – Southern California Inc., erroneously named KB Home Sales, Inc.; and KB Home Holdings, Inc., erroneously named as KB Home Holding, Inc. (collectively “Defendants”) named Carl to let him know if anything was wrong with the house within the first 10 days. Plaintiffs present that they noticed bubbles in the vinyl flooring and alerted Carl. Following this, Plaintiffs allege that a regional manager of Defendants conducted tests on the home and determined that the vapor emission volume was 20.9 lbs./1,000 sq. ft. and indicated water in the concrete, Defendants informed Plaintiffs that they could provide new flooring, Plaintiff’s requested another house due to the issues, and there was no response. Plaintiffs detail multiple attempts at contacting Defendants to no avail. Plaintiffs contend that they purchased a new house due to Defendants’ inaction.

On May 18, 2023, Plaintiffs filed their Complaint alleging three causes of action for: (1) Breach of Contract, (2) Constructive Trust and Misrepresentation, and (3) Unfair and Deceptive Business Practices.

On May 31, 2023, Plaintiffs filed their First Amended Complaint (“FAC”) alleging the same causes of action as in the Complaint.

On September 13, 2023, Plaintiffs filed an Ex Parte Application for Order Shortening Time and to advance and Vacate on the Hearing of Motion and Motion to Stay the Entire Action, subsequently denied.

Application – Defendants move to stay the action due to the Right to Repair Act. Defendants present that the Right to Repair Act requires that a homeowner must first comply with prelitigation procedures before filing a construction defect action and Plaintiffs have failed to do so.

Plaintiffs argue that the construction defect has been going on for four years and they have attempted communication multiple times through multiple modes, identifying the location of the defects, the address of the home, the name of the parties, and their intent to file a suit. Plaintiffs present that they brought suit because they were not satisfied with the offered repairs. Plaintiffs also present that they believe that they have followed the laws as they have engaged in mediation and communication, and the Right to Repair Act does not apply to Plaintiffs’ Breach of Contract claim.

Defendants present that Plaintiffs’ belief that they complied with the Right to Repair Act is not evidence that they actually complied with the Right to Repair Act. Defendants contend that no evidence has been presented showing that Plaintiffs provided written notice via certified mail, overnight mail, or personal delivery as required under the Right to Repair Act. Defendants further present that under the Right to Repair Act, Plaintiffs are required to allow Defendants to make repairs. Defendants highlight that Plaintiffs’ claims are not limited to fraud and breach of contract, that the allegations relate to construction defects. Defendants also present that mediation discussions should be disregarded by the Court as such discussions are confidential, privileged, and inadmissible under Cal. Evid. Code § 1119(c).

The Court emphasizes that the issue at hand is whether the Right to Repair Act acts as a bar to this action, not whether the parties have entered settlement or mediation discussions.

For purchase agreements signed after 2002, Cal. Civ. Code § 895 et seq., commonly referred to as the Right to Repair Act, specifies various statutory procedures that must be followed before a homeowner may sue a builder for defects in construction of a new residential unit. The statutes provide builders with the absolute right to attempt a repair prior to a homeowner filing a lawsuit. (Anders v. Superior Court (2011) 192 Cal.App.4th 579, 590.)

The California Supreme Court summarized the prelitigation requirements of the Right to Repair Act:

That process begins with written notice from the homeowner to the builder of allegations that the builder's construction falls short of the standards prescribed by the Act. (§ 910.) The builder must acknowledge receipt (§ 913) and thereafter has a right to inspect and test any alleged defect (§ 916). Following any inspection and testing, the builder may offer to repair the defect (§ 917) or pay compensation in lieu of a repair (§ 929). The Act regulates the procedures for any repair, authorizes mediation, and preserves the homeowner's right to sue in the event the repair is unsatisfactory and no settlement can be reached. (§§ 917–930.)

(McMillin Albany LLC v. Superior Court (2018) 4 Cal.5th 241, 247-48 (“McMillin”).)

The McMillin court discussed the legislative intent behind the Right to Repair Act. The opinion reads, in relevant part:

First, the provision applies to “any action” seeking damages for a construction defect, not just any action under the title. (§ 896.) This suggests an intent to create not merely a remedy for construction defects but the remedy. Second, “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.” (Ibid.) This express language of limitation means that a party seeking damages for a construction defect may sue for violation of these standards, and only violation of these standards, unless the Act provides an exception. This clause evinces a clear intent to displace, in whole or in part, existing remedies for construction defects. Third, “[t]his title applies to original construction intended to be sold as an individual dwelling unit,” but “[a]s to condominium conversions, this title does not apply to or does not supersede any other statutory or common law.” (§ 896.) The Act governs claims concerning stand-alone homes; for such disputes, the Act's provisions do “supersede any other statutory or common law” except as elsewhere provided. (§ 896.)

We turn next to chapter 5 (§§ 941–945.5), which contains key provisions governing the damages recoverable in an action under the Act and the extent to which the Act provides the exclusive vehicle for recovery of such damages. The Legislature was well aware of the main categories of damages involved in construction defect actions (economic loss, property loss, death or personal injury) and their treatment under existing law. The major stakeholders on all sides of construction defect litigation participated in developing the Act. (See Sen. Judiciary Com., Analysis of Sen. Bill No. 800 (2001–2002 Reg. Sess.) as amended Aug. 28, 2002, pp. 3, 8.) The Legislature also expressly considered Aas and its rule requiring property damage or personal injury, not just economic loss, for any tort suit alleging a construction defect. (Assem. Com. on Judiciary, Analysis of Sen. Bill No. 800 (2001–2002 Reg. Sess.) as amended Aug. 26, 2002, pp. 2–3; Sen. Judiciary Com., Analysis of Sen. Bill No. 800 (2001–2002 Reg. Sess.) as amended Aug. 28, 2002, pp. 1–4.) Informed by the various stakeholders' concerns, the Legislature enacted provisions that reflect a conscious effort to address how and when various categories of damages would be recoverable going forward.

The provisions of chapter 5 make explicit the intended avenues for recouping economic losses, property damages, and personal injury damages. Section 944 defines the universe of damages that are recoverable in an action under the Act. (§ 944 [“If a claim for damages is made under this title, the homeowner is only entitled to damages for” a series of specified types of losses].) In turn, section 943 makes an action under the Act the exclusive means of recovery for damages identified in section 944 absent an express exception: “Except as provided in this title, no other cause of action for a claim covered by this title or for damages recoverable under Section 944 is allowed.” (§ 943, subd. (a).) In other words, section 944 identifies what damages may be recovered in an action under the Act, and section 943 establishes that such damages may only be recovered in an action under the Act, absent an express exception.

The legislative history of the Act confirms that displacement of parts of the existing remedial scheme was no accident, but rather a considered choice to reform construction defect litigation.

First, language in the Legislature's analyses of the Act's effects reflects an intent that the Act would govern not only no damage cases, but cases where property damage had resulted. The Act's standards were designed so that “except 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.” (Sen. Judiciary Com., Analysis of Sen. Bill No. 800 (2001–2002 Reg. Sess.) as amended Aug. 28, 2002, p. 4.) Both halves of this intended application are significant: Liability under the standards would attach even in the absence of actual damage, thus effectively abrogating Aas. And liability under the standards would also attach in cases of actual damage; in other words, the Legislature anticipated that passage of the Act would result in standards that governed liability even when violation of the standards had resulted in property damage. The Legislature thus recognized and intended that claims under the Act would cover territory previously in the domain of the common law.

Second, the Act “establishes a mandatory process prior to the filing of a construction defect action,” with the “major component of this process” being “the builder's absolute right to attempt a repair prior to a homeowner filing an action in court.” (Sen. Judiciary Com., Analysis of Sen. Bill No. 800 (2001–2002 Reg. Sess.) as amended Aug. 28, 2002, p. 5.) These purposes, the creation of a mandatory prelitigation process and the granting of a right to repair, would be thwarted if we were to read the Act to permit homeowners to [*256] continue to sue as before at common law, without abiding by the procedural requirements of the Act, for construction defect claims involving damages other than economic loss.

Third, although there is no doubt that the Act had the intended effect of overriding Aas’s limits on construction defect actions, that effect was treated in both the Assembly and Senate as one consequence of the overall reform package, not as the principal goal of the Act. The Assembly Committee on the Judiciary described as a “principal feature of the bill” the establishment of construction defect standards and then observed that one consequence of the “standards [is to] effectively end the debate over the controversial decision in the Aas case.” (Assem. Com. on Judiciary, Analysis of Sen. Bill No. 800 (2001–2002 Reg. Sess.) as amended Aug. 26, 2002, p. 3, italics added; accord, Sen. Rules Com., Off. of Sen. Floor Analyses, Analysis of Sen. Bill No. 800 (2001–2002 Reg. Sess.) as amended Aug. 28, 2002, p. 3.) In a similar vein, the Senate Judiciary Committee described the Act as creating standards that would “govern any action seeking recovery of damages arising out of or related to construction defects” and then noted that “[i]n addition” the rules for liability under 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.” (Sen. Judiciary Com., Analysis of Sen. Bill No. 800 (2001–2002 Reg. Sess.) as amended Aug. 28, 2002, p. 4, italics added.) If the Van Tassels’ interpretation of the Act were correct, then the legislative analyses certainly bury the lede.

In sum, the legislative history confirms what the statutory text reflects: The Act was designed as a broad reform package that would substantially change existing law by displacing some common law claims and substituting in their stead a statutory cause of action with a mandatory prelitigation process.

Stated differently, “[t] statutes apply only to construction defect claims, not claims for breach of contract, fraud, or personal injury. But these statutes and their prelawsuit filing requirements do apply to any claim relating to damages for residential construction deficiencies, not just to those claims brought under the Right to Repair Act.” (Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2023) C. Prelawsuit Notices, Claims and Demands, Cal. Prac. Guide Civ. Pro. Before Trial Ch. 1-C.)

Cal. Civ. Code § 896 states, in relevant part: “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.” Thus, it appears Plaintiffs’ claims are encompassed by the Right to Repair Act as the gravamen of the FAC is a construction defect regarding the floors.

Cal. Civ. Code § 931 provides: “If a claim combines causes of action or damages not covered by this part, including, without limitation, personal injuries, class actions, other statutory remedies, or fraud-based claims, the claimed unmet standards shall be administered according to this part, although evidence of the property in its unrepaired condition may be introduced to support the respective elements of any such cause of action. As to any fraud-based claim, if the fact that the property has been repaired under this chapter is deemed admissible, the trier of fact shall be informed that the repair was not voluntarily accepted by the homeowner. As to any class action claims that address solely the incorporation of a defective component into a residence, the named and unnamed class members need not comply with this chapter.” Although this section supports that other laws may apply or be available for construction defects, a stay is required when the prelitigation requirements for an action arising out of construction defects is not complied with. (See McMillin, supra, 239 Cal.App.4th 1132; Elliot Homes, Inc. v. Superior Court (2016) 6 Cal.App.5th 333.)

Here, while Plaintiffs attempted communication with Defendants, there has been no presentation that Cal. Civ. Code § 910 was followed. (See Cal. Civ. Code § 910 [“(a) The claimant or his or her legal representative shall provide written notice via certified mail, overnight mail, or personal delivery to the builder, in the manner prescribed in this section, of the claimant’s claim that the construction of his or her residence violates any of the standards set forth in Chapter 2 (commencing with Section 896). That notice shall provide the claimant’s name, address, and preferred method of contact, and shall state that the claimant alleges a violation pursuant to this part against the builder, and shall describe the claim in reasonable detail sufficient to determine the nature and location, to the extent known, of the claimed violation. In the case of a group of homeowners or an association, the notice may identify the claimants solely by address or other description sufficient to apprise the builder of the locations of the subject residences. That document shall have the same force and effect as a notice of commencement of a legal proceeding. (b) The notice requirements of this section do not preclude a homeowner from seeking redress through any applicable normal customer service procedure as set forth in any contractual, warranty, or other builder-generated document; and, if a homeowner seeks to do so, that request shall not satisfy the notice requirements of this section.”].)

The Court notes that there is an exception to the Right to Repair Act for nonbuilders; however, it does not appear to be applicable to the case at hand as the FAC appears to allege that Defendants are buildings. (See State Farm General Ins. Co. v. Oetiker, Inc. (2020) 58 Cal.App.5th 940, 945.)

The Court also notes that Cal. Civ. Code § 920 provides an exception to the requirements:

If the builder fails to make an offer to repair or otherwise strictly comply with this chapter within the times specified, the claimant is released from the requirements of this chapter and may proceed with the filing of an action. If the contractor performing the repair does not complete the repair in the time or manner specified, the claimant may file an action. If this occurs, the standards set forth in the other chapters of this part shall continue to apply to the action.

However, it appears that this exception does not apply as (1) the prelitigation was not followed, and (2) the FAC alleges that Defendants offered to make repairs.

Defendant KB Home Greater Los Angeles, Inc.; KB Home Sales – Southern California Inc.; and KB Home Holdings, Inc.’s Motion to Stay the Action is GRANTED.

[1] Plaintiffs Eugene Jones and Jamie Jones share the same surname. The Court address each individually by their first name for the purpose of clarity. No disrespect in meant.