Barnhouse v. City of Pinole

• Decision Date: 29 June 1982
• Citation: 183 Cal.Rptr. 881,133 Cal.App.3d 171
• Court: California Court of Appeals Court of Appeals
• Parties: Paul BARNHOUSE, Eileen Barnhouse, Ruben Carrillo, Lydia Carrillo, Robert C. Dempster, Julia Dempster, and Freddy Self, Plaintiffs and Appellants, v. CITY OF PINOLE, State of California, Department of Transportation, Earl W. Smith, Earl W. Smith Developers, Ltd., and Earl W. Smith Development Organization, Defendants and Respondents. Civ. 50631.

Page 881

183 Cal.Rptr. 881

133 Cal.App.3d 171

Paul BARNHOUSE, Eileen Barnhouse, Ruben Carrillo, Lydia Carrillo, Robert C. Dempster, Julia Dempster, and Freddy Self, Plaintiffs and Appellants, v. CITY OF PINOLE, State of California, Department of Transportation, Earl W. Smith, Earl W. Smith Developers, Ltd., and Earl W. Smith Development Organization, Defendants and Respondents.

Civ. 50631.

Court of Appeal, First District, Division 2, California.

June 29, 1982.

Hearing Denied Sept. 8, 1982.

Stephen J. Kennedy, Donald W. Curran, Oakland, for appellants.

Raymond J. Bergez, Hardin, Cook, Loper, Engel & Bergez, Oakland, for respondent City of Pinole.

Richard G. Rypinski, San Diego, Lee Tyler, Robert J. DeFea, Thomas C. Nagle, Robert R. Buell, San Francisco, for respondent State of Cal. James Martin, Hancock, Rothert & Bunshoft, Eliassen, Postel & Mee, San Francisco, for respondents Earl W. Smith, Earl W. Smith Developers, Ltd., and Earl W. Smith Development Organization.

James P. Watson, Cox, Castle & Nicholson, Los Angeles, for Associated General Contractors of California, Inc., amicus curiae on behalf of the Smith Respondents.

GRODIN, Presiding Justice.

This appeal arises out of an action for damages to real property and personal injuries resulting from soil subsidence. Appellants, plaintiffs below, are owners of single family residences located on Sarah Drive in Pinole. Respondents, defendants below, are: Earl W. Smith, Earl W. Smith Developers, Ltd., and Earl W. Smith Development Organization (hereafter collectively Smith), the developers of appellants' lots and builder of their homes; and the City of Pinole (City) and the State Department of Transportation (State), the owners of public streets, highways and associated drainage systems which drained storm waters into a ditch onto property owned by Pacific Gas and Electric Company (PG&E) and bordering appellants' lots to the north. Various of appellants' theories were eliminated through demurrer, dismissal, or nonsuit, and the one theory which went to the jury--against the government respondents for inverse condemnation--resulted in a defense verdict.

Statement of Facts

In 1956, the State built an east-west freeway through unimproved land north of what later became appellants' property. The plans called for relocation of a natural stream bed onto PG&E's property immediately to the south, and for culverts to carry storm water from the freeway into the stream bed.

In 1959, Smith prepared to develop the property immediately to the south of the PG&E right-of-way. Soils engineers retained by Smith found springs and slides on the proposed subdivision site, to the north of what would become the Barnhouse, Carrillo, and Dempster lots, and recommended that a permanent drain be installed. There is a factual dispute as to whether this recommendation was implemented.

Civil engineers retained by Smith designed the subdivision. Their design placed the lots sloping downhill from west to east parallel to the freeway, with backyards facing north and the front of the houses facing south onto Sarah Drive. In the course of grading operations, soils engineers discovered "active seepage zones" opposite one of the lots. The civil engineers designed a storm drain to pick up most of the surface waters, fed by a catch basin located between lots 8 and 9, and emptying into the relocated stream on the PG&E right-of-way.

Upon completion of the subdivision, the City approved the improvements and accepted the storm drain system. The civil engineers certified to the Federal Housing Authority that the subdivision had been constructed in conformance with the approved plans, and the soils engineers similarly gave their approval.

In 1961, appellants Mr. and Mrs. Barnhouse, Mr. and Mrs. Carrillo, and Mrs. Dempster (then Mrs. Stearns) purchased their homes from Smith. They were advised that the houses were on fill, but they were not advised of the preexisting slides and springs. All testified they would not have bought their homes had they been so advised.

In February 1962, a slide began at the bottom of the hill behind the Barnhouse and Carrillo lots. These appellants notified the City, which in turn notified the State and Smith. Experts for Smith and the governmental bodies each placed the blame on the other. There was evidence from which the jury could have found that the 1962 slide was caused by Smith, the State and City, all three, or none of them.

In July 1963, Smith prepared a written agreement for the signatures of the Carrillos and the Barnhouses which provided for their assignment to him of their existing causes of action against the State arising out of the 1962 slide, and in which Smith agreed to do the following: "A) At its sole expense cause such work to be performed as shall be necessary to stabilize the slide area and to compact the earth which moved. B) Do such preventative work as such be recommended by [Smith's soil engineers] so as to prevent future slides from occurring." Smith's agent, William Peloyan, personally delivered the proposed agreements to the Barnhouses, and told them that Smith "would do the work, fix it, and [there] would be ... no problem anymore with it." The Barnhouses and Mr. Carrillo consulted the city attorney, who advised them to sign the agreement, and they did. Peloyan then signed the agreements on behalf of Smith, and sent duplicate originals to the Barnhouses and the Carrillos on August 2, 1963, with a cover letter stating that Smith's engineers and soils engineers were working on details of the proposed preventative work, and that bids would be obtained and work would commence within a few weeks.

On August 13, 1963, Smith's civil engineers submitted a plan, which was approved by Smith's soils engineers, calling for permanent repair of the slide through removal of the slide mass, installation of a drain blanket, reconstruction of the slope, and installation of a pipe leading from the State culvert and tying into a closed culvert to be installed at the bottom of the ditch. The civil engineers estimated the cost of repair would be $10,260, but the lowest bid came in at $25,830. In September the soils engineers, noting the expense involved and the unresolved question of reimbursement from the State, submitted a revised recommendation for a "temporary measure" through excavation of the toe material and installation of a buttress and diverter plate, measures which, he stated, would "not restore the original contours or stability to the area," but would be only an "interim protective measure." Smith delivered a copy of the new plan to the city attorney, identifying it as "first aid maintenance," "an interim measure," and "not the final solution."

In September and October 1963, Smith proceeded to make a repair conforming to neither of the above plans. The cost of the actual repair was less than one quarter of that contemplated under the lowest bid for the "permanent" repair. The parties dispute the materiality of the changes, but it is clear that neither the City nor Smith informed the appellants of any deviation from the "permanent" repair plan.

In 1964, Smith filed suit against the State, alleging that the State was responsible for "severe slide damage" to property at 1699 and 1709 Sarah Drive "commencing with the winter of 1961-1962, and continuing to the present time." In response to interrogatories from the State, Smith admitted, "[I]t is possible that there may be future damage to the subject property as a result of the condition of defendants' property." None of the appellants was informed of the possibility of future damage. The suit was not brought to trial, and it was ultimately dismissed with prejudice.

In the spring of 1974 slides returned. The northwest corner of the Carrillos' backyard collapsed, a crack in the hill progressed toward the Barnhouse home, the rear section of their patio collapsed, and hairline cracks appeared in the concrete block wall around the Dempster's backyard. Appellant Self, who bought a house in 1971 as a rental, became aware of a bulge in the top of the wooden retaining wall and noticed that a tree in his backyard was leaning downhill toward the creek. He also became aware of water accumulating on the left side of his house.

On December 6, 1974, the Barnhouses, the Carrillos and the Dempsters along with other plaintiffs filed suit against the State, the City and PG&E. During mid-1975, they learned for the first time that Smith had not made the repairs recommended by his soils and civil engineers, and served Smith as a Doe defendant. Thereafter, Self and another couple who had purchased houses in the subdivision, the Swansons, filed similar suits, and in August 1977, the three actions were consolidated for trial. Some of the plaintiffs settled after judgment.

The Barnhouses, the Carrillos, the Dempsters, and Self have appealed from the judgments in favor of Smith and the government respondents. They contend that the trial court erred (1) in holding their breach of contract and warranty claims against Smith to be barred by the 10-year statute of limitations applicable to construction projects (Code of Civ.Proc., § 337.15); (2) in granting Smith's motion for nonsuit after presentation of appellants' case on theories of willful misconduct and fraudulent concealment; (3) in eliminating certain of appellants' theories against the City and the State through pretrial order; (4) in eliminating appellants' nuisance theory against the City and State at the close of appellants' case; and (5) in instructing the jury on inverse condemnation. They also contend (6) that the jury's defense verdict was not supported by substantial evidence. We will consider each of these contentions in turn.

I.

Was appellants' action against Smith for breach of contract and breach of warranty properly dismissed under Code of Civil Procedure section 337.15?

Section 337.15 of the Code of Civil Procedure, ¹ quoted in full at...