Hensel Phelps Constr. Co. v. Superior Court of San Diego Cnty.

• Decision Date: 22 January 2020
• Docket Number: D076264
• Citation: 257 Cal.Rptr.3d 746,44 Cal.App.5th 595
• Parties: HENSEL PHELPS CONSTRUCTION CO., Petitioner, v. The SUPERIOR COURT OF SAN DIEGO COUNTY, Respondent; Smart Corner Owners Association, Real Party in Interest.
• Court: California Court of Appeals Court of Appeals

44 Cal.App.5th 595

257 Cal.Rptr.3d 746

HENSEL PHELPS CONSTRUCTION CO., Petitioner,

v. The SUPERIOR COURT OF SAN DIEGO COUNTY, Respondent;Smart Corner Owners Association, Real Party in Interest.

D076264

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

Filed January 22, 2020

Lorber, Greenfield & Polio, Bruce W. Lorber, Bellevue, Robert B. Titus, Poway; McCormick, Barstow, Sheppard, Wayte & Carruth and Scott M. Reddie, Fresno, for Petitioner.

Finch Thornton & Baird, P. Randolph Finch, Jr., and Daniel P. Scholz, San Diego, for Associated General Contractors of America, San Diego Chapter, as Amici Curiae on behalf of Petitioner.

Hirsch Closson and Robert V. Closson, San Diego, for California Professional Association of Specialty Contractors, as Amicus Curiae on behalf of Petitioner.

No appearance for Respondent.

Epsten Grinnell & Howell, Anne L. Rauch, San Diego, Trinette A. Sachrison, Gordon A. Walters; Kasdan Lippsmith Weber Turner, Kenneth S. Kasdan, Michael D. Turner, Irvine, and Brittany L. Grunau, for Real Party in Interest.

GUERRERO, J.

Petitioner Hensel Phelps Construction Co. (Hensel Phelps) is a defendant in construction defect litigation filed by plaintiff and real party in interest Smart Corner Owners Association (Smart Corner). Hensel Phelps filed a motion for summary judgment contending, among other things, that Smart Corner's claims were barred by the 10-year limitations period under Civil Code section 941.¹ That statute provides, in relevant part, as follows: "Except as specifically set forth in this title, no action may be brought to recover under this title more than 10 years after substantial completion of the improvement but not later than the date of recordation of a valid notice of completion." ( § 941, subd. (a).) Hensel Phelps is a general contractor. It entered into a prime construction contract with the developer of the mixed-use project at issue. Smart Corner was not a party to that contract. In its motion for summary judgment, Hensel Phelps asserted that "substantial completion" under the statute had the same meaning as "substantial completion" in its construction contract with the developer. Because the parties to the construction contract agreed that "substantial completion" occurred on a certain date at the time of construction, Hensel Phelps argued that the limitations period began to run on that date. Because Smart Corner asserted its claims more than 10 years later, Hensel Phelps contended they were untimely.

The trial court denied the motion. It found that the definition of substantial completion in the contract did not trigger the running of the statute. And, even if it did, Smart Corner had raised a triable issue of fact whether the definition of substantial completion under the contract had been satisfied on the date asserted by Hensel Phelps.

Hensel Phelps petitioned this court for a writ of mandate directing the trial court to vacate its order denying the motion and enter an order granting the motion. Hensel Phelps primarily argued that the date of substantial completion adopted by the parties to the contract "conclusively establishe[d]" the date of substantial completion under the statute. We issued an order to show cause and stayed litigation in the trial court. These proceedings followed.

We conclude the trial court did not err by denying Hensel Phelps's motion for summary judgment. Hensel Phelps offers no authority for the novel proposition that certain parties may, by contract, conclusively establish the date when a limitations period begins to run on another party's cause of action. Likewise, Hensel Phelps has not shown that the statute should be interpreted to adopt the provisions of its construction contract. While we need not precisely define substantial completion under the statute for purposes of this writ proceeding, it is clear that the statute does not simply adopt the date determined by private parties to a contract for their own purposes as the date of substantial completion. We therefore deny the petition.

FACTUAL AND PROCEDURAL BACKGROUND

Consistent with our standard of review, we recite the historical facts in the light most favorable to Smart Corner as the nonmoving party. (See Saelzler v. Advanced Group 400 (2001) 25 Cal.4th 763, 768, 107 Cal.Rptr.2d 617, 23 P.3d 1143 ( Saelzler ); Light v. Dept. of Parks & Recreation (2017) 14 Cal.App.5th 75, 81, 221 Cal.Rptr.3d 668.)

Hensel Phelps entered into a prime construction contract with the owner and developer of a mixed-use project in San Diego, California. Hensel Phelps was the general contractor for the project. The project included a residential condominium tower, which would eventually be managed and maintained by Smart Corner. Smart Corner was not a party to the construction contract.

The contract obligated Hensel Phelps to construct the development, including the residential tower. The contract defined the "Work" to be completed by Hensel Phelps as "all that is necessary or required to be done, performed or furnished, in order to construct and complete the Project to the point of readiness for operation and occupancy, pursuant to and in strict compliance with the Contract Documents and applicable law ...."²

The contract also obligated Hensel Phelps achieve "Substantial Completion" of the entire Work under the contract within a time certain. Substantial Completion was defined by the contract as "that stage in the progress of the Work" when (1) "[s]uch Work or component is sufficiently complete in accordance with the Contract Documents to permit lawful occupancy and use thereof for its intended purpose"; (2) "a temporary certificate of occupancy has been issued with no material conditions (i.e., conditions that would impair the issuance of a permanent certificate of occupancy) that in Owner's reasonable judgment are not susceptible of being completed in a timely manner"; (3) "all Project utilities have been properly installed and approved by the applicable utility companies"; (4) "[t]he Architect has issued its Certificate of Substantial Completion"; and (5) "Contractor has certified that all remaining Work (as such remaining work is mutually determined by Contractor, Architect, and Owner in their final review of the Project) will not interfere with Owner's use or enjoyment of the Project and is capable of being completed and will be completed within sixty (60) consecutive calendar days following the date on which the Architect shall have issued a certificate of Substantial Completion."

The contract provided, "Minor corrective or deficient Work (such as touch-up painting or replacement of minor broken or defective materials), or minor incomplete Work, shall not be deemed a cause for asserting that the Work has not achieved Substantial Completion, provided, however, that the conditions requiring such corrective, deficient or incomplete Work are not such as would render any portion of the Work unsuitable for occupancy or use by Owner or any prospective purchaser of a condominium unit, or would result in the inclusion in any temporary certificate of occupancy of any condition not acceptable to Owner in its reasonable discretion.... However, the Work will not be considered sufficiently complete in accordance with the Contract Documents or suitable for Substantial Completion review until all Project systems included in the Work are operational as designed and scheduled, all designated or required governmental inspections and certifications have been made and posted .... In general, the only remaining Work shall be minor in nature, so that the Owner could occupy the building on that date and the completion of the Work by the Contractor would not materially interfere or hamper the Owner's (or those claiming by, through or under Owner) normal business operations."

"Upon achieving Substantial Completion ..., Contractor shall provide Owner with written notice requesting that Owner file such notice(s) of completion for the Work as may be established by any applicable laws. If Owner objects to such notice(s) being filed, it shall notify Contractor within ten (10) days of its receipt of Contractor's written notice, whereupon the parties shall promptly meet to resolve such objections."

The project architect signed the Certificate of Substantial Completion on May 24, 2007. The Certificate stated, "The Work performed under this Contract has been reviewed and found, to the Architect's best knowledge, information and belief, to be substantially complete. Substantial Completion is the state in the progress of the Work when the Work or designated portion is sufficiently complete in accordance with the Contract Documents so that the Owner can occupy or utilize the Work for its intended use." In accordance with the contract, a list of items to be completed or corrected ("punchlist" items) was attached to the Certificate. It included the entry canopy glass, the rooftop handicap lift, the security system, four streetlights, mail box lock, spa-elevator lift, and "[l]ighting at BBQ." A Hensel Phelps representative signed the certificate, agreeing that "[t]he Contractor will complete or correct the Work on the list of items attached hereto within Sixty (60) days from the above date of Substantial Completion." An owner's representative also signed the certificate, stating that "[t]he Owner accepts the Work or designated portion as substantially completed and will assume full possession at 8:00 a.m. on July [__], 2007."³

On the same date as the Certificate of Substantial Completion, Hensel Phelps, the owner, and a Smart Corner representative wrote to the City of San Diego and requested a temporary certificate of occupancy "in order that we may complete the following items, none of which are fire, life, health safety, or disabled access features[:] [¶] 1. Residential Unit Flooring [¶] 2. Residential Unit Appliances." The City granted temporary occupancy for 30 days.

The City of San Diego continued to perform required inspections of the...