The Right to Repair Statute in California requires a homeowner show a breach of contract or negligence to succeed.

Issue By: Joseph M. Fenech

Acqua Vista Homeowners Association v. MWI, Inc.

California Court of Appeals, Fourth Appellate District (January 26, 2017)

Civil Code § 8951 et seq. (the “Act”) establishes a set of building standards pertaining to new residential construction and provides homeowners with a cause of action against, among others, material suppliers, for a violation of the standards(§§ 896, 936). Here, the Fourth District Court of Appeals was asked to decide whether the Act requires homeowners suing a material supplier to prove that material supplied violated a particular standard of the Act as the result of negligence or a breach of contract. The Court concluded that a homeowner must prove that the Act was violated by showing a breach of contract or negligence in order to prevail.

In this case, Acqua Vista Homeowners Association (the “HOA”) sued MWI, Inc. (“MWI”), a supplier of pipe used in the construction of the HOA condominium development. The operative third amended complaint contained a claim for a violation of the Act’s standards in which the HOA alleged that defective cast iron pipe was used throughout the project. At a pretrial hearing, the HOA explained that it was not pursuing any claim premised on the doctrine of strict liability and that it was alleging a single cause of action against MWI for violations of the Act’s standards.

A jury trial was held on the HOA’s claims under the Act against MWI, and another iron pipe supplier, Standard Plumbing & Industrial Supply Co. (“Standard”). At trial, the HOA presented evidence that the pipes supplied by MWI contained manufacturing defects, that they leaked, and that the leaks had caused damage to various parts of the condominium development.

Near the close of evidence, MWI filed a motion for a directed verdict on the grounds that the HOA failed to present any evidence that MWI had caused a violation of the Act’s standards as a result of MWI’s negligence or breach of contract. The trial court denied the motion, concluding that the HOA was not required to prove that any violations of the Act’s standards were caused by MWI’s negligence or breach of contract. In reaching this conclusion, the court relied on the final sentence of section 936, which states in relevant part, “[t]he negligence standard in this section does not apply to … material suppliers … with respect to claims for which strict liability would apply.”

The trial court entered a judgment against MWI in March, 2015 in the amount of $23,955,796.28, reflecting MWI’s 92 percent responsibility for the total damages suffered. After the jury rendered a verdict against MWI, MWI filed a motion for judgment notwithstanding the verdict (“JNOV”) on the same ground as it had raised in its motion for directed verdict. The trial court denied the JNOV on the same grounds it denied the motion for a directed verdict.

On appeal, MWI claimed that the trial court misinterpreted the Act and erred in denying its motion for a directed verdict and motion for JNOV. The Appellate Court agreed. According to the Fourth District, § 936 contains an “explicit adoption of a negligence standard for claims” under the Act against material suppliers. (Greystone Homes, Inc. v. Midtec, Inc. (2008) 168 Cal.App.4th 1194 at p. 1216, fn. 14.) Since it was undisputed that the HOA’s claim was brought under the Act, it was required to prove that MWI “caused, in whole or in part, a violation of a particular standard as the result of a negligent act or omission or a breach of contract.” (§ 936.) The court concluded that because there was no evidence that MWI caused a violation of the Act’s standards through its negligence or breach of contract, the trial court erred in denying MWI’s motion for a directed verdict and JNOV. Accordingly, the Court reversed the judgment and the trial court’s order denying MWI’s motion for JNOV and remanded the matter to the trial court with directions to grant MWI’s motion for a directed verdict and to enter judgment in favor of MWI.

The Court acknowledged that the plain language of the final sentence in § 936, when read in isolation, is ambiguous. However, in their view, the negligence standard in this section did not apply to any general contractor, subcontractor, material supplier, individual product manufacturers, or design professional with respect to claims for which strict liability would apply. The Court pointed out that this case involved only a cause of action for violation of the Act. There were no claims for strict liability which required proof of negligence or breach of contract to prevail.

COMMENT

This case held that a homeowner must prove that a material supplier was negligent or had breached a contract if the homeowner does not allege common law theories of strict liability in the operative complaint. This requirement can best be attacked at trial by way of a directed verdict or JNOV, because a demurrer or a motion for summary judgment would bring this pleading defect to the attention of plaintiff’s counsel and allow for amendment before trial.

For a copy of the complete decision, see: Acqua Vista Homeowners Assn. v. MWI, Inc.

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