El Escorial Owners' Ass'n v. Dlc Plastering

• Decision Date: 06 September 2007
• Docket Number: No. B173829.,B173829.
• Citation: 154 Cal.App.4th 1337,65 Cal.Rptr.3d 524
• Court: California Court of Appeals Court of Appeals
• Parties: EL ESCORIAL OWNERS' ASSOCIATION et al., Plaintiffs and Appellants, v. DLC PLASTERING, INC., et al., Defendants and Appellants.

65 Cal.Rptr.3d 524

154 Cal.App.4th 1337

EL ESCORIAL OWNERS' ASSOCIATION et al., Plaintiffs and Appellants, v. DLC PLASTERING, INC., et al., Defendants and Appellants.

No. B173829.

Court of Appeal, Second District, Division 6.

September 6, 2007.

Cappello & Noel, A. Barry Cappello, Troy A. Thielemann and Matthew M. Clarke, Santa Barbara, for Plaintiffs and Appellants El Escorial Owners' Association and Investment Construction, Inc.

Hardin E. Coffin, Mark T. Coffin, Santa Barbara, Jeffrey L. Boyle, Driscoll & Reynolds and David E. Driscoll, Riverside, for Defendants and Appellants Coastline Painting & Drywall, Inc., Mid-Cal Painting & Drywall, Inc., and Pyramid Tile Company.

Henderson & Borgeson, Santa Barbara, and Barton C. Merrill, Benton, Orr, Duval & Buckingham, Ventura, Dale, Braden & Hinchcliffe, for Defendant and Appellant DLC Plastering, Inc.

Dale, Braden & Hinchcliffe, Kathleen S. Braden, Ventura, and Barton C. Merrill, Adler Law Group and Erwin Adler, for Defendant and Appellant Alderman Construction, Inc.

GILBERT, P.J.

Defendants are found liable for negligence in a multiparty construction defect case. The trial court gives them partial credits for their damages paid in good faith settlements before trial by jointly liable defendants. This assures a fair and appropriate distribution of damages. Plaintiff does not receive a double recovery. Nor do the nonsettling defendants bear a disproportionate share of damages. The trial court has acted within its discretion.

Plaintiff El Escorial Owners' Association (Escorial), a condominium association, appeals a judgment, partially in its favor, in its construction defect action against defendants DLC Plastering, Inc. (DLC), Alderman Construction, Inc. (Alderman), Coastline Painting & Drywall, Inc. (Coastline), Mid-Cal Painting & Drywall, Inc. (Mid-Cal), and Pyramid Tile Company (Pyramid). DLC and Alderman appeal the damage judgments entered against them. Coastline, Mid-Cal, and Pyramid prevailed at trial, but appeal the orders that reduce their attorney fees. Defendant and cross-complainant Investec Construction, Inc. (Investec), which settled and assigned its causes of action to Escorial, appeals and joins on the side of Escorial.

The trial court found that DLC's and Alderman's latent construction defects caused $8,600,000 in damages to Escorial. It gave them credits, however, for a prior good faith settlement between Escorial and other contractors. This reduced DLC's and Alderman's combined obligation to $2,461,495. The court also ruled that Escorial could not maintain a nuisance cause of action for construction defects.

Among other things, we conclude that Escorial did not state a valid nuisance cause of action; the good faith settlement proceedings were adversarial and fair; and the court gave proper settlement credits to DLC and Alderman. The statutes of limitations were tolled pursuant to the Calderon Act (former Civ.Code, § 1375). Escorial's action was timely because the construction defects fell within the statute of limitations and there is substantial evidence that Alderman caused damage to Escorial. The trial court properly rejected Alderman's claim that it was exempt from liability because it complied with the project's building plans. We also conclude that the collateral source rule applied, DLC agreed to indemnify the builder, the court properly awarded Escorial its expert fees as damages and did not abuse its discretion by reducing Coastline's, Mid-Cal's and Pyramid's request for attorney fees. We affirm.

FACTS

Escorial is the condominium association for four, 3-story buildings housing 261 condominiums. These units were originally apartments in a complex owned and operated by another company. Between 1990 and 1996, the apartments were converted to condominiums in a four-phase construction project.

Viola, the initial construction contractor for the condominium conversion, required its subcontractors to sign indemnity agreements to hold Viola harmless for construction defects. Viola's services were terminated before the completion of the project. Investec, the new builder, agreed to complete the construction and required Viola's subcontractors, which included DLC, to sign an assumption agreement. The subcontractors agreed to indemnify the new builder, Investec.

As Investec completed construction, it formed a homeowners association and managed the condominium project. The Investec Management Corporation controlled the daily operations of the association. The Escorial homeowners assumed the management of the condominium association in July of 1995 and on June 15, 1996, "assumed voting control" of the board. Escorial discovered a series of construction defects.

On June 28, 1996, Escorial gave notice that it was proceeding under the Calderon Act (former Civ.Code, § 1375) and demanded that Investec correct numerous construction defects. Escorial and Investec met over the next two years in an attempt to resolve the dispute.

In December of 1998, as negotiations continued, Escorial and Investec signed an agreement to toll the statute of limitations retroactive to December 1, 1996, and prospectively until the end of the negotiations. Ultimately, they were unable to resolve their differences about the repairs.

On March 31, 2000, Escorial filed a construction defect lawsuit against 35 contractors and subcontractors, alleging causes of action for negligence, nuisance, and breach of implied warranties. Defendant Investec cross-complained against its subcontractors for indemnity. Prior to trial, most of the defendants settled. The court approved good faith settlements totaling $10,629,759. Investec and its related entities contributed $5,649,999, and several subcontractors contributed $4,979,760. Escorial proceeded to trial against the subcontractors who did not settle. Investec had assigned its indemnity claims against these subcontractors to Escorial.

The defendants were Pyramid, an installer of bathtubs and windows; Mid-Cal and Coastline, painters; Alderman, a framing contractor; and DLC, a plastering contractor. DLC performed work in the 1991 and 1994 construction phases. Alderman began work in the 1994 and 1996 phases. The parties agreed to a court trial.

For a period covering a year and a half before trial, the trial court approved numerous good faith settlements involving other defendants. These settlements did not specify particular construction defects attributable to any of these settling defendants. During a hearing involving the final settlement, the nonsettling defendants asked the trial court to apportion the amounts of settlement among the various settling contractors and relate those amounts to specific construction defects. In this way, the trial court could decide the extent to which each nonsettling defendant might be entitled to credits should it be found liable at trial.

Instead of continuing the trial date, or reopening the previously approved settlements, the trial court devised a plan. As the evidence unfolded at trial, the court would hold hearings on apportionment during which it would "make the decision on the allocations with the assistance of [Escorial and the nonsettling defendants.]" The parties did not object to this procedure.

As the trial progressed, the court held periodic hearings on apportionment in which the parties presented evidence and registered objections. The court made findings on the apportionment of liability and damages and approved a spread sheet that listed categories of defects and damages and the amount attributable to each settling party within each category.

Liability of DLC and Alderman

Various experts testified at trial. Michael Shotwell, a construction expert, testified that Alderman's framing work was deficient. He said it should have used "metal clips" to "structurally tie" the "upper plates into the walls." Instead, it used nails to create a "nailing ledger," an inadequate structure for the purpose of making that area water tight. As a result, moisture seeped into the walls causing water damage.

The trial court found Alderman was negligent for not making water tight connections "between the newly constructed walls and the original construction." DLC was negligent because its work was not water tight. This caused "water intrusion" and "dry rot" damage.

The trial court rejected DLC's and Alderman's statute of limitations defense. It found their latent construction defects caused damage to interior walls that could not have been discovered by Escorial until 1997. Escorial's lawsuit filed in 2000 was therefore timely. It ruled that the tolling agreement between Investec and Escorial complied with the Calderon Act. It found DLC caused $7,000,000 damages and Alderman caused $1,600,000 damages.

Reducing DLC's and Alderman's Liability by Granting Settlement Credits

The trial court agreed with DLC and Alderman that they should receive credits based on the allocations in the spread sheet. The trial court said: "Alderman and DLC were assigned some portion of fault for the exterior wall assemblies [category]. Thus each gets some portion of the good faith settlement. The sum in that column is $1,066,340." The trial court gave Alderman a setoff from that category for $225,000.

The trial court found other categories in the settlement applied to their work. It said: "All of the `settlement damages' in the following categories are referred to ... as consequential damages and ... [DLC and Alderman] ... are entitled to an offset for all these damages: ... Landscape etc. $1,189,583 ... Additional costs $195,341 ... Construction Management $202,925 ... Move-Out $3,393,292 ... Security $91,024 ... Total $5,072,165." "After considering all the evidence the Court conclude[d] the appropriate amount to subtract from the damages attributable to Alderman for these `costs' is $1,000,000." It said: "Total offset damages (i.e. from its share of the exterior wall assemblies column and from the total...