In Acqua Vista Homeowners Assn. v. MWI, Inc., (2017) 7 Cal.App.5th 1129, the California Court of Appeal, Fourth District, clarified the burden of proof that homeowners must satisfy to prove defects in new construction against materials suppliers. The Court held that under SB 800 (the Right to Repair Act, “RRA”, California Civil Code § 895 et seq.), a material supplier may be held liable for defects in new residential construction if the supplier “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.”
The Act sets forth numerous standards for residential construction, and offers remedies under theories of contract and tort liability when those standards are not met. Under California common law, liability for construction defects is not recognized for mere economic loss. This means homeowners previously had no recourse when a product was found to be defective unless that product caused personal injury or actual damage to property. The legislative intent of the 2002 RRA was to provide homeowners with a remedy that would otherwise be barred by California’s economic loss rule by allowing homeowners of new property to recover for construction defects when there is no personal injury or actual property damage.
In this case, Acqua Vista Homeowners Association (“HOA”) sued MWI, Inc. (“MWI”), a supplier of water pipes used in the construction of the Acqua Vista Condominium development in San Diego. The pipes were manufactured in China, and the HOA alleged that the pipes contained manufacturing defects, that they leaked, and that the leaks had caused corrosion so as to impede the useful life of the plumbing/sewer system. The HOA argued that MWI violated the Act. The HOA did not assert a stand alone claim of common law strict liability.
At trial, MWI argued 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 held that the HOA was not required to present such evidence as the final sentence of the Act reads, “”[t]he negligence standard in this section does not apply to . . . material suppliers . . . with respect to claims for which strict liability would apply.” The jury found the evidence presented by the HOA proved that the pipes were defective because they “leaked” and were “corroded so as to impede the useful life of the plumbing/sewer system,” and awarded the HOA $23,955,796.28 in damages. The jury did not find that the pipes caused personal injury or property damage.
MWI appealed, arguing that the trial court misinterpreted the Act by not requiring the plaintiff to prove negligence of breach of contract. The appellate court rejected the HOA’s argument that all it needed to prove was that a violation of the construction standards contained in the RRA. It overturned the trial court decision and held that the final sentence of the RRA “merely provides that the negligence standard applicable to claims brought against material suppliers under the RRA does not apply to common law claims for strict liability against such suppliers.” Therefore, because the HOA did not assert a strict liability claim against MWI here, and could not prove MWI was negligent/in breach of contract, it was not entitled to recovery under the RRA.
©2017 Miles J. Dolinger. This article is not intended to and does not constitute legal advice or a solicitation for the formation of an attorney-client relationship.
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