Since SB800 became law in 2003, cases interpreting the statute have been few and far between. Finally, another case has come down which highlights an aspect of SB800 that is a trap for the unwary. On December 14, 2011 in Daniel A. Baeza v. Superior Court (Castle & Cooke Cailfornia, Inc.), the 5th Appellate District denied a petition for a writ of mandate challenging a trial court ruling staying an action so that the parties could comply with the alternative contractual nonadversarial procedures ("contractual procedures") in Castle & Cooke's sales contracts. The fact that Castle used its own procedures rather than the statutory nonadversarial procedures was the difference in the outcome of the case.
The case giving rise to the dispute was typical. A law firm representing 80 homeowners filed suit against developer Castle before complying with Castle's contractual procedures. Castle filed a motion to compel compliance. Plaintiffs opposed the motion arguing that Castle had not complied with Civil Code section 912. Section 912 has become a trap for the unwary in that if the builder fails to produce documents or timely complete other requirements, the homeowners are relieved from SB800.
Section 912, which is found in "Chapter 4" of the relevant statute, outlines the statutory procedures parties must follow when the builder chooses not to establish its own contractual procedures. For example, section 912 requires, among other things, that within 30 days of a written request, the builder provide the homeowner with copies of specified documents, including the plans, specifications, and limited warranties. Importantly, section 912(i) states that if the builder fails to comply with any of the requirements of section 912, then the homeowner is relieved from the requirements of "this chapter." The outcome of the Baeza case turned on the language of "this chapter" in section 912(i).
The Court of Appeal in Baeza ruled that the language in section 912(i) did not apply because Castle elected to use its own contractual procedures. When a builder, unlike Castle, elects to use the statutory procedure at the time of sale and thereafter fails to produce documents within 30 days of the request, homeowners are relieved from the requirement of "this chapter" and may file suit. The Court of Appeal found that Castle was not attempting to enforce the statutory procedures of "this chapter." Rather, Castle was attempting to enforce contractual procedures not contained in Chapter 4. Consequently, section 912(i) did not apply.
The Court of Appeal also rejected Plaintiffs' claim that the contractual procedures were not enforcable because the contract contained a limitation of liability for damages which conflicted with SB800, and which was otherwise illegal and/or unconscionable. The Court of Appeal did not decide this issue because it observed that even if the limitation of liability clause was unenforceable, the clause was severable from the contractual procedures and was not an independant basis for voiding the entire agreement.
In conclusion, if a builder implements its own procedures in its contracts, the builder need not worry about also complying with section 912. Our opinion remains to be that builders are better served by drafting their own procedures because, among other reasons, the statutory procedures have unrealistic timeframes in which certain activities must be completed.
This document is intended to provide you with general information about construction law developments. The contents of this document are not intended to provide specific legal advice. If you have questions about the contents of this alert, please contact Steve Cvitanovic at 415.281.7608 or scvitanovic@hbblaw.com or contact your preferred Haight Brown & Bonesteel, LLP attorney. This communication may be considered advertising in some jurisdictions.