Fnb Mortgage Corp v. Pacific General Group

• Decision Date: 08 December 1999
• Docket Number: No. C030439.,C030439.
• Citation: 76 Cal.App.4th 1116,90 Cal.Rptr.2d 841
• Court: California Court of Appeals Court of Appeals
• Parties: FNB MORTGAGE CORP. et al., Cross-Complainants and Appellants, v. PACIFIC GENERAL GROUP, Cross-Defendant and Respondent.

90 Cal.Rptr.2d 841

76 Cal.App.4th 1116

FNB MORTGAGE CORP. et al., Cross-Complainants and Appellants, v. PACIFIC GENERAL GROUP, Cross-Defendant and Respondent.

No. C030439.

Court of Appeal, Third District.

December 8, 1999.

Certified for Partial Publication.^*

Susan D. Hyman, Senn Palumbo Meulemans, LLP, for Appellants and Cross-Complainants FNB Mortgage Corp. et al.

Mark T. Guerra, John F. Doyle, Clapp, Moroney, Bellagamba, Davis and Vucinich, for Respondent and Cross-Defendant, Pacific General Group.

KOLKEY, J.

This action arises from alleged construction defects at a Sacramento apartment complex. The central issue on appeal is whether the 10-year statute of limitations under Code of Civil Procedure section 337.15 ¹ bars the cross-complaint of FNB Mortgage Corp. and Granite Savings Bank (collectively, FNB) for express contractual indemnity against the developer, cross-defendant Pacific General Group (Pacific General).

Section 337.15 requires that a suit to recover damages for a latent design or construction defect be brought within 10 years of the date of substantial completion of the improvement, regardless of the date of discovery of the defect. Subdivision (c) of that section, however, permits a transactionally related cross-complaint for indemnity to be filed outside the 10-year period if the main action has been brought within the 10-year period.

In this case, the main action, and FNB's cross-complaint, were not brought until after the expiration of the 10-year period. However, FNB contends that the main action was timely filed by virtue of a tolling agreement entered between the plaintiff and FNB, and that alternatively, the limitations period was equitably tolled by reason of Pacific General's promises to repair the defects. The trial court ruled that the action was barred by the statute of limitations, and granted summary judgment in favor of cross-defendant Pacific General.

On appeal, FNB challenges the trial court's determination that its cross-complaint was time-barred; contends that the trial court committed reversible error in denying the parties a second hearing on Pacific General's summary judgment motion following supplemental briefing; and claims that the trial court erred in denying its request for a continuance to complete discovery before rendering judgment.

In the published portion of our opinion, we hold that:

(1) FNB's tolling agreement with the plaintiff does not extend the time to file suit against Pacific General.

(2) Section 337.15 is not subject to equitable tolling for repair work. The addition of such a judicially inspired exception would be inconsistent with the statutory scheme, which establishes an outside limit for instituting actions and expressly delineates the specific exceptions to that limitations period. Such an exception would also undermine the purpose of the statute "to protect contractors and other professionals and tradespeople in the construction industry from perpetual exposure to liability for their work." (Sandy v. Superior Court (1988) 201 Cal.App.3d 1277, 1285, 247 Cal.Rptr. 677.) In short, engrafting a judicially created exception onto the existing, legislatively enacted exceptions — thereby weakening the statute's specific objective of offering repose — would usurp the Legislature's role of determining policy.

(3) Even if the statute were subject to tolling, Pacific General's purported promises to plaintiff that it would repair the defects could not toll the statute of limitations for FNB, since the latter did not rely on any such promises.

We shall accordingly affirm the judgment.

I. FACTUAL AND PROCEDURAL BACKGROUND

A. The Underlying Litigation

This action arises from alleged construction defects in a 520-unit Sacramento apartment complex known as Smoketree Gardens (the complex).

In 1982 and 1983, FNB's predecessor and Pacific General entered into written agreements to develop the complex, in which Pacific General agreed to act as developer and construct the complex.² These agreements collectively form the basis for FNB's claim for express indemnity against Pacific General. The nature of the contentions on appeal makes it unnecessary to discuss the terms of these contracts or their indemnity clauses in further detail.

In or around March 1984, Smoke Tree Investors, Ltd., a limited partnership (hereinafter referred to as the plaintiff), became the owner of the complex. A Notice of Completion for the complex was filed on August 14, 1984.³

Sometime before July 1989, the tennis court surfaces at the complex began to crack. Pacific General retained a geotechnical consultant to assess the problem. That consultant prepared reports addressing the problem, which were dated December 1, 1989 and February 20, 1991. The latter report identified severe "cracking and heaving/blistering throughout most of the [tennis court] pavement area," as well as cracking of Sheetrock and displacement of tile, wall paneling, and cabinetry in several buildings.

Beginning in January 1992, FNB entered into a series of agreements with the plaintiff owner of the complex, which tolled the statute of limitations as to plaintiffs claims against FNB and its subsidiaries until November 30, 1994.

On the day its tolling agreements with FNB expired, plaintiff initiated the instant action, alleging latent defects in the design or construction of significant structural components,⁴ and seeking damages under a variety of legal theories (the defects action). Defendants included FNB's predecessors ⁵

and Pacific General.

B. FNB's Cross Complaint

On March 3, 1995, FNB filed a cross-complaint against Pacific General, among others, for, inter alia, negligence, breach of implied warranty, and implied equitable indemnity. Pacific General answered and raised various affirmative defenses, including the statutes of limitations. FNB later added a claim for breach of express indemnity against Pacific General.

C. Settlement of the Defects Action

The defects action settled effective March 3, 1997, with FNB and Pacific General each contributing $325,000 to the settlement in consideration of plaintiffs dismissal of the defects action against them. The written "Settlement Agreement and Release" recites that all cross-complaints shall be dismissed, with the exception of FNB's claim against Pacific General for express indemnity.

D. Pacific General's Motion for Summary Judgment

Pacific General moved for summary judgment on FNB's cross-complaint on the ground, among others, that the cross-complaint as to Pacific General was barred by the 10-year statute of limitations governing latent construction defects set forth in section 337.15.⁶ It argued that (1) on its face, the defects action and the cross-complaint were filed more than 10 years after the complex was substantially completed, in violation of the 10-year limitation period under section 337.15; (2) FNB's written tolling agreements with plaintiff did not toll the time to file FNB's cross-complaint against Pacific General, as Pacific General was not a party to those agreements; and (3) Pacific General did nothing to toll the statute of limitations.

FNB responded that its cross-complaint against Pacific General was not barred by the 10-year statute of limitations because (1) the defects action was timely filed against FNB (by virtue of its tolling agreements), and consequently, FNB's cross-complaint was timely pursuant to section 337.15, subdivision (c); and (2) Pacific General's investigation of the construction defects between July 1989 and June 1991, and its promises to repair them, induced the plaintiff not to file the defects action for two years, thereby tolling the statute of limitations during that period. In support of the latter assertion, FNB submitted copies of correspondence between Pacific General and the plaintiffs general partner, Continental American Properties, Ltd. (Continental American), concerning (1) Pacific General's retention of a consultant to investigate the defects (particularly the cracking of the tennis court surfaces) and (2) Continental American's requests that Pacific General take action to remedy the defects.

FNB also moved to continue the hearing on the summary judgment motion pursuant to section 437c, subdivision (h), on the ground that the discovery necessary for FNB's response had not been completed, including the depositions of Pacific General's designated "most knowledgeable person," Robert Skiff, and former officers of Pacific General.

A hearing on Pacific General's motion for summary judgment was conducted on February 20, 1998. After entertaining oral argument on the merits of the motion (including on whether Pacific General's actions tolled operation of the statute of limitations), the court granted FNB's request to continue the matter so that it could conduct one additional deposition on the issue of whether Pacific General's conduct tolled the statute of limitations. It also authorized supplemental briefing. Thereafter, the trial court granted FNB's motion to reopen discovery to permit three additional depositions.

In its supplemental opposition to the motion for summary judgment, FNB introduced evidence that during late 1984, a Pacific General employee made repairs to the drainage system at the complex, and reiterated its argument that Pacific General had tolled the 10-year statute of limitations by making promises to the plaintiff that it would fix the defects. It also requested a further continuance of the hearing because it had not completed the depositions authorized by the trial court.

Without entertaining further oral argument, the trial court granted Pacific General's motion for summary judgment. The court found that "[a]ll issues in this case have been extensively briefed. The dispositive issue of the statute of limitations was addressed in the prior papers[,] argued orally before the Court and was thoroughly briefed in the supplemental papers. Therefore, the Court will not...