In Clarendon America Insurance Company v. Starnet Insurance Company (No. G042353), the Fourth District Court of Appeals ruled in an insurer's suit seeking indemnity, declaratory relief, and contribution from defendant insurer, arising from an underlying lawsuit by a homeowner's association for construction defects. The Judgment of the trial court in favor of the plaintiff was affirmed as a provision in a commercial general liability (CGL) insurance policy requiring the insurer to defend the insured against any "suit" seeking damages to which the insurance applies, includes the duty to defend the insured in proceedings under the Calderon Act. The CGL policies in issue, as all standard CGL policies, define "suit" to mean "a civil proceeding in which damages . . . to which this insurance applies are alleged." The Court ruled that this process prescribed by the Calderon Act (the Calderon Process) is a civil proceeding within this definition. The Calderon Act requires a common interest development association to satisfy certain dispute resolution requirements with respect to the builder, developer, or general contractor before the association may file a complaint in court for construction or design defects. Although the Calderon Process occurs before a complaint is filed and itself does not result in a judgment or court-ordered payment of money, the Calderon Process is an integral part of construction defect litigation initiated by a common interest development association and the duty to defend still applies. This is a significant ruling for those involved in construction defect litigation for developments.
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In L.A. Unified School District v. Great American Insurance Company, No. S165113, the California Supreme Court issued its ruling resolving an issue that had been interpreted differently by the court of appeals. The Court of Appeal decision, followed here by the trial court, held that to recover for nondisclosure, the contractor must show the public entity affirmatively misrepresented or intentionally concealed material facts that rendered the furnished information misleading. That Appellate Court also broadly held that a contractor need show only that the public entity knew material facts concerning the project that would affect the contractor's bid or performance and failed to disclose those facts to the contractor. (Jasper Construction, Inc. v. Foothill Junior College Dist. (1979) 91 Cal.App.3d 1, 10-11.) Contrast, a different Court of Appeal had held a contractor need not prove an "affirmative fraudulent intent to conceal" when disclosure would have eliminated or materially qualified the misleading effect of facts disclosed. (Welch v. State of California (1983) 139 Cal.App.3d, 556.) Finally, a third Court of Appeal had suggested that the careless failure to disclose information may allow recovery if the public entity possessed superior knowledge inaccessible to the contractor. (Thompson Pacific Construction, Inc. v. City of Sunnyvale (2007) 155 Cal.App.4th 525, 552.)
The California Supreme Court affirmed, and held a contractor need not prove an affirmative fraudulent intent to conceal. Rather--with the qualifications stated below--a public entity may be required to provide extra compensation if it knew, but failed to disclose, material facts that would affect the contractor's bid or performance. Because public entities do not insure contractors against their own negligence, relief for nondisclosure is appropriate only when (1) the contractor submitted its bid or undertook to perform without material information that affected performance costs; (2) the public entity was in possession of the information and was aware the contractor had no knowledge of, nor any reason to obtain, such information; (3) any contract specifications or other information furnished by the public entity to the contractor misled the contractor or did not put it on notice to inquire; and (4) the public entity failed to provide the relevant information. In these circumstances, a public works contractor can obtain extra work compensation for such material non-disclosure.
In the case of Villa Vicenza Homeowner’s Association v. Noble Court Development, LLC, the Fourth District Court of Appeals affirmed the trial court’s denial of the developer’s motion to compel arbitration. This was a homeowners association's suit for construction defects in San Diego County. The developer attempted to compel arbitration, based solely on an arbitration clause contained in the recorded CC&R’s. The Court confirmed that the recorded CC&R's, standing alone, are not a contract between the developer and the homeowners association. The HOA only came into existence after the CC&Rs were recorded, and thus, here there was no showing the association entered into a binding arbitration agreement with the developer that would allow arbitration to be compelled. This is consistent with long held case precedents that a waiver of the right to a trial by jury, typically requires actual notice and clear written consent.
As previously reported, in Catherine Way v. Anne Wolff, Case No. A125581, the First Appellate District had affirmed a Trial Court’s Judgment finding that Eucalyptus Trees are hazardous and subject to a permanent injunction. The Trial Court determined that the Eucalyptus Trees were a public nuisance, and ordered the nuisance abated by the trees being removed. The First Appellate District affirmed the decision. Apparently after losing at Trial, and losing at the Appellate Court level, Wolff filed a Petition at the California Supreme Court to have the decision reviewed. On June 9, 2010, the petition for review was denied by the Supreme Court. This should end this long standing dispute between neighbors. The only unfortunate result, is that the First Appellate District only issued this decision as an unpublished opinion, meaning it is not normally citable. It is not clear why this was done as this case does involve a legal issue of continuing public interest. Nevertheless, it does stand for the proposition that Eucalyptus Trees which drop debris, broken branches, are overgrown and in danger of toppling over in the wind, and as a fire hazard, are a clear public nuisance. The Supreme Court was correct to deny the petition for review, as the Trial Court and Appeals Court correctly found that these large and overgrown Eucalyptus Trees constituted substantial and unreasonable interference to the neighbors, and that the owner’s failure to maintain them was negligent.
In Catherine Way v. Anne Wolff, Case No. A125581, the First Appellate District affirms a Trial Court’s Judgment finding that Eucalyptus Trees are hazardous and subject to a permanent injunction. The Trial Court determined that the Eucalyptus Trees were a public nuisance, and ordered the nuisance abated by the trees being removed. The First Appellate District affirmed the decision. The appellate case was just decided on March 30, 2010, so the opinion has not yet been published and cannot be officially cited. However, once published it may be somewhat of a landmark decision for property owners concerned over the extreme hazards presented by Eucalyptus Trees on adjacent property.
The Court noted the numerous experts involved in the litigation, and the undisputed testimony that the Eucalyptus Trees dropped continuous debris, broken branches, were extremely overgrown and in danger of toppling over in the wind, and were a fire hazard, all of which could result in loss of life or property damage. The Eucalyptus was considered a “pyrophytic” tree, or in other words, a tree with a high fire danger! Based on Civil Code Section 3479, a nuisance is in general, anything that is injurious to health, or is indecent to the senses, or an obstruction of the free use of property, so as to interfere with the comfortable enjoyment of life or property. The Appeals Court correctly found that these large and overgrown Eucalyptus Trees constituted substantial and unreasonable interference to the neighbors, and that the owner’s failure to maintain them was also negligent.
In Diaa Yassin v. Vinicio Solis, Case No. B215201, the California Court of Appeals Second Appellate District dealt with a lawsuit filed by a contractor Yassin against Solis as homeowners, for claims and cross-claims of breach of contract. Plaintiff's action against the homeowners was for money he claimed was owed to him for construction work on defendants' home, and defendants' cross-complaint was for breach of contract in connection with the work performed. The trial court's judgment awarded $50,000 to the defendants and nothing for the plaintiff, but also awarded attorney’s fees to the defendant homeowners even though there was no contractual attorney’s fee clause. The Court acknowledged that a party did not have to plead that it is seeking attorney fees in order to recover those fees, so that was the bar to recovery here. In this case, the request for attorney’s fees was ultimately made under Civil Code Section 3260, which holds that for the wrongful withhold of a retention payment, that in addition to the statutory penalties, the prevailing party was entitled to their attorney’s fees. Here the last contractual payment claimed to be due to plaintiff was not a retention payment, it was simply a final payment. There agreement did not have retention terms, which generally are 10% of each progress payment. Therefore, a final payment is not a retention payment under section 3260, and defendants even though they were the prevailing party, were not entitled to attorney fees under Section 3260(g).
The Court of Appeals (Fourth Appellate District) just decided the case of Esaul Alatriste v. Cesar’s Exterior Designs, Inc., Case No. D054761. This was a homeowner's suit by Alatriste against a defendant landscaper of Cesar’s , where Alatriste sought reimbursement of the $57,500 paid defendant for landscaping work. Part of the claim was pursuant to Business & Professions Code Section 7031, which allows a party to recover "all compensation paid to an unlicensed contractor." The trial court's judgment in favor of the plaintiff was affirmed where: 1) plaintiff's prior knowledge of defendant's unlicensed status does not bar his section 7031(b) reimbursement claim; 2) plaintiff is entitled to recover the total amount paid even though defendant was licensed during a portion of the work; and 3) plaintiff is entitled to recover payments for materials retained by him. Significantly, even though Alatriste knew Cesar’s was unlicensed at the time of entering into the contract, and received the benefit of the bargain by receiving a significant amount of landscaping work and services, Alatriste was still entitled to recover all of the money paid to Cesar’s Exterior due to his being unlicensed at the time. This is a stern warning to contractors to make sure your contractor’s license is in effect at all times, or risk serious consequences.
Previously, the Contractors' State License Laws under the Business & Professions Code, provided for the licensure and regulation of contractors by the Contractors' State License Board. Before the amendment, the law made it a misdemeanor for a person to engage in the business or act in the capacity of a contractor without having a license and makes a first offense punishable by imprisonment in the county jail for no more than 6 months, or by a fine not exceeding $1,000, or both, with increased penalties for subsequent offenses. The law also had required a court to order a defendant convicted of a crime under those provisions, to pay restitution to the victim, as specified. As amended, the first conviction is still a misdemeanor, but is now punishable by a fine not exceeding $5,000 or by imprisonment in a county jail for no more than 6 months, as specified, or both, and subsequent convictions also would require higher penalties as well. The law also amended provides that a person who used the services of an unlicensed contractor is a victim of crime and eligible for restitution for economic losses, regardless of whether that person had knowledge that the contractor was unlicensed. See Business & Professions Code Section 7028 for the complete text of the code.
The California Third District Court of Appeals recently decided Abdelhamid v. Fire Insurance Exchange, No. C059098. This was a homeowner's action against her insurance company after it denied coverage to her for the fire that burned her house down. Summary judgment was granted in favor of the insurance company and was affirmed by the appeals court, as the trial court did not err in granting summary judgment on the breach of contract claim. Plaintiff's failure to comply with reasonable requests under the insurance policy, constituted material breach of her contractual duties. Specifically, it was held that in a EUO (Examination under Oath), a party is required to answer material questions from the insurer and cannot simply rely on a blanket response of refusing to answer, based on the advice of counsel. Additionally, an insurer may be substantially prejudiced by an insured’s failure to produce documentation, failure to answer material questions, failure to submit a complete proof of loss with supporting documentation, and refusal to cooperate, that may under the circumstances justify an outright denial of a claim.
Website: www.MauLaw.com 3:48 PM GMT | Read comments(0)February 24Kuish v. Smith Case covers the return of a Deposit in a rising Real Estate Market.
The California Court of Appeals Fourth District recently decided the case of Bradford Kuish v. William W. Smith, Jr., et al., Case No. G040743, which covers one circumstance of the return of a purchase deposit for real estate. Plaintiff Kuish entered into a written agreement to purchase defendants Smith’s Laguna Beach residence for $14 million, but later Kuish unilaterally cancelled the escrow. Defendants promptly sold the property to a third party for $15 million, and in essence suffered no actual damages by the cancellation of the escrow. Despite this, Smith refused to return plaintiff’s $620,000 deposit, relying on the purchase agreement’s description of the deposit as “non-refundable.” Plaintiff Kuish filed suit to recover the deposit. The trial court's judgment in favor of defendants was reversed and remanded by the Court of Appeals. Held, that in in a rising market, the seller of real property is limited to the recovery of consequential damages and interest against the buyer who breached the purchase agreement, and in this case the defendants' retention of the deposit in the circumstance of a rising market, constituted an invalid forfeiture.
Of course, recently the real estate market has not been rising or at least not rising significantly. However, in pockets of communities and in the future, there still will be rising markets and this case interpretation gives some guidance. If an escrow for real estate is cancelled by a Buyer, and a Seller is able to resale for more that the cancelled escrow price, then the Seller is not entitled to retain the full deposit, in the absence of a valid liquidated damages clause. Such a Seller is still entitled to actual consequential damages he can prove. In any event, and regardless of the market conditions. Buyers are forewarned to always think twice about ever making a deposit that is termed non-refundable or to signing a liquidated damage clause.