Acqua Vista Homeowners Ass'n v. MWI, Inc.

• Decision Date: 26 January 2017
• Docket Number: D068406
• Citation: 7 Cal.App.5th 1129,213 Cal.Rptr.3d 323
• Court: California Court of Appeals Court of Appeals
• Parties: ACQUA VISTA HOMEOWNERS ASSOCIATION, Plaintiff and Respondent, v. MWI, INC., Defendant and Appellant.

7 Cal.App.5th 1129

213 Cal.Rptr.3d 323

ACQUA VISTA HOMEOWNERS ASSOCIATION, Plaintiff and Respondent,

v.MWI, INC., Defendant and Appellant.

D068406

Court of Appeal, Fourth District, Division 1, California.

Filed January 26, 2017

Horvitz & Levy, H. Thomas Watson, Daniel J. Gonzalez, Burbank; White, Oliver & Amundson, White, Amundson, Kish & Sweeney, Daniel M. White, Steven G. Amundson and Heather N. Catron, San Diego, for Defendant and Appellant.

Morris, Sullivan & Lemkul, Shawn D. Morris, Matthew J. Yarling, San Diego; Peters & Freedman, David M. Peters, Encinitas, and Kyle E. Lakin, Carlsbad, for Plaintiff and Respondent.

AARON, J.

I.INTRODUCTION

Civil Code section 895 ¹ 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). We must determine whether the Act requires homeowners suing a material supplier under the Act to prove that the material 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." (§ 936.) We conclude that the Act requires such proof.

Our conclusion is supported by the text, structure, and legislative history of the Act, as well as this court's prior interpretation of section 936 in Greystone Homes, Inc. v. Midtec , Inc. (2008) 168 Cal.App.4th 1194, 86 Cal.Rptr.3d 196 (Greystone ). In Greystone , this court stated that "a product manufacturer is liable [under section 936] only where its ‘negligent act or omission or a breach of contract’ ... caused a violation of the Act's standards." (Id. at p. 1216, 86 Cal.Rptr.3d 196, quoting § 936, italics omitted.) Section 936 treats product manufacturers and material suppliers identically.²

In this case, Acqua Vista Homeowners Association ("the HOA") sued MWI, Inc. ("MWI"), a supplier of pipe used in the construction of the Acqua Vista condominium development. The operative third amended complaint contained a claim for a violation of the Act's standards in which the HOA alleged that "[d]efective cast iron pipe manufactured in China [was] used throughout the building." At a pretrial hearing, the HOA explained that it was not pursuing a claim premised on the doctrine of strict liability³ and that it was alleging a single cause of action against MWI for violations of the Act's standards.

During a jury trial, near the close of evidence, MWI filed a motion for a directed verdict on the ground 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, as required. 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." (§ 936.)⁴ 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, which the trial court denied for the same reason it provided in denying the motion for a directed verdict.

On appeal, MWI claims that the trial court misinterpreted the Act and, as a result, erred in denying its motion for a directed verdict and motion for JNOV. We agree. The first sentence of section 936 contains an "explicit adoption of a negligence standard for claims" under the Act against material suppliers. (Greystone , supra , 168 Cal.App.4th at p. 1216, fn. 14, 86 Cal.Rptr.3d 196.) While the final sentence of section 936 is not a model of textual clarity, for the reasons explained below, standard techniques of statutory interpretation make clear that this sentence merely provides that the negligence standard applicable to claims brought against material suppliers under the Act does not apply to common law claims for strict liability against such suppliers. Since it is 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.) We also conclude that because there is no evidence in the record that MWI caused a violation of the Act's standards through its negligence or breach of contract, the court erred in denying MWI's motion for a directed verdict and motion for JNOV. Accordingly, we reverse the judgment and the trial court's order denying MWI's motion for JNOV and remand 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.⁵

II.FACTUAL AND PROCEDURAL BACKGROUND

A. The action

The HOA filed this construction defect action in December 2009. In September 2013, the HOA filed the operative third amended complaint in which it named MWI, and others, as defendants.⁶ The third amended complaint alleged a cause of action styled as "Violation of SB800 ^{[7 ]}Construction Standards, Civil Code § 896" against all defendants, including MWI. (Boldface & italics omitted.) The cause of action contained the following relevant allegation:

"The violations of SB800 standards by the defendants, and each of them, alleged herein include, but are not limited to, the following design, construction and/or manufacturing defects at the project: Defective cast iron pipe manufactured in China and used throughout the building."

B. The trial

The trial court held a jury trial 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.

MWI moved for a directed verdict on the ground that the HOA had failed to present evidence that MWI caused a violation of the Act's standards as a result of MWI's negligence or breach of contract . In addition, MWI requested that the trial court instruct the jury that the HOA was required to present such evidence. The trial court denied MWI's motion for a directed verdict and MWI's jury instruction requests.

C. The jury's verdict

The jury rendered a special verdict that responded to four questions. The first question asked the jury, "Have the cast iron pipes supplied by the Defendants at Acqua Vista leaked?" The jury responded in the affirmative with respect to both MWI and Standard. The second question asked the jury, "Have the cast iron pipes supplied by either of the Defendants to Acqua Vista corroded so as to impeded the useful life of the plumbing/sewer system?"⁸ The jury again responded in the affirmative with respect to both defendants. The third question asked the jury, "If you answered yes as to either Defendant in questions 1 or 2, what is the total amount of Plaintiffs [sic ] damages?" The jury found that the HOA had suffered $18,500,000 in damages "[f]or the reasonable cost of repairing any violations," $7,130,000 in damages "[f]or reasonable relocation and storage expenses," and $408,909 "[f]or reasonable investigative costs."⁹ Finally, the jury was asked, "For those Defendants that you answered ‘Yes' to in Question 1 or Question 2, assuming 100%, what percentage of responsibility is attributable to each of the following for the damages to the Plaintiff identified in Question 3[?]" The jury responded that MWI was responsible for 92%, Standard, 8%, the "pipe installer," 0%, and the HOA, 0%.¹⁰

D. The judgment

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.¹¹

E. Postjudgment motions

MWI moved for JNOV on several grounds, including that the HOA had failed to present 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 HOA's motion for JNOV, reasoning in part:

"MWI argues that judgment should be entered in favor of MWI because Plaintiff failed to prove a prima facie case for liability under ... § 896. Specifically, MWI argues Plaintiff's [sic ] must prove negligence and causation and that Plaintiff failed to do so. As this court previously ruled, the last sentence of ... § 936 [‘[h]owever, the negligence standard in this section does not apply to any general contractor, subcontractor, material supplier, individual product manufacturer, or design professional with respect to claims for which strict liability would apply’] removes any negligence/causation requirement in a ... § 896 action against certain defendants, including MWI, a material supplier in this case. The court is not persuaded by MWI's reliance on Greystone [, supra ,] 168 Cal.App.4th 1194 because the issue of the effect of the last sentence of ... § 936 was not before the Court of Appeal in Greystone ."

MWI also filed a motion for new trial on numerous grounds, including that the trial court had failed to instruct the injury on negligence and causation with respect to the HOA's claim under the Act and that the special verdict form had not required any findings on these issues. The trial court employed similar reasoning in denying MWI's motion for new trial as it had used in denying MWI's motion for JNOV.

F. The amended judgment and appeals

MWI filed an appeal from the judgment and the order denying the motion for JNOV. The trial court entered an amended judgment in the amount of $23,955,796.28 against MWI in July 2015.¹² MWI filed a second notice of appeal from the original and amended judgments and the order...