Industrial Risk Insurers v. Rust Engineering Co.

• Decision Date: 29 July 1991
• Docket Number: No. A051674,A051674
• Citation: 232 Cal.App.3d 1038,283 Cal.Rptr. 873
• Court: California Court of Appeals Court of Appeals
• Parties: INDUSTRIAL RISK INSURERS, Plaintiff and Appellant, v. The RUST ENGINEERING COMPANY, Defendant and Respondent.

Page 873

283 Cal.Rptr. 873

232 Cal.App.3d 1038

INDUSTRIAL RISK INSURERS, Plaintiff and Appellant, v. The RUST ENGINEERING COMPANY, Defendant and Respondent.

No. A051674.

Court of Appeal, First District, Division 4, California.

July 29, 1991.

Certified for Partial Publication ^*

Review Denied Oct. 17, 1991.

Andrew W. Horstman, Robins, Kaplan, Miller & Ciresi, Minneapolis, Minn., William P. Linhoff, Jr., Newport Beach, Frank S. Towner, San Francisco, for plaintiff and appellant.

John P. Makin, Patricia A. Perkins, Cooper, White & Cooper, San Francisco, Anthony W. Hawthorne, Cooper, White & Cooper, Walnut Creek, for defendant and respondent.

PERLEY, Associate Justice.

In this case we hold that the 10-year time limit Code of Civil Procedure section 337.15 places on suits for latent defects in improvements to real property commences when the defendant's work on the improvement is substantially completed, rather than when the improvement itself is substantially completed. The trial court here granted the motion of respondent, The Rust Engineering Company, for summary judgment under section 337.15, finding that the $20 million damage claim of appellant, Industrial Risk Insurers, was time-barred and that there was no triable issue of fact to the contrary. We affirm the judgment entered in favor of respondent.

I.

A 400-ton boiler at Louisiana Pacific Fiberboard Corporation's paper mill in Antioch, California, exploded on July 5, 1987, killing three people, wounding several others and causing extensive property damage. Appellant, Fiberboard's property and business interruption insurer, filed suit against respondent on December 24, 1987, to recover amounts paid under its policy on account of the explosion. The complaint alleged that the explosion was caused by failure of the rapid drain system respondent designed for the boiler, and that respondent was liable for the resulting damages under theories of strict liability, negligence or breach of warranty. Judgment was entered for respondent on the ground that it had substantially completed its services in connection with the rapid drain system by December 24, 1977, ten years before the filing of the complaint.

There is no dispute on appeal that the rapid drain system was an "improvement" to real property within the meaning of section 337.15. ¹ The issue is whether this statute's 10-year time frame for suits for latent defects commenced when the system itself was substantially completed, or earlier, when respondent's work on the system was substantially completed. In the published portion of our discussion, we will explain why we conclude that the limitations period began with the substantial completion of respondent's services. In the unpublished portion, we will address the evidence presented in connection with the motion for summary judgment, which established that virtually all of respondent's services with respect to the rapid drain system were furnished more than 10 years prior to the filing of the complaint.

II.

We are called upon to construe subdivisions (a) and (g) of section 337.15, which read as follows: "(a) No action may be brought to recover damages from any person, or the surety of a person, who develops real property or performs or furnishes the design, specifications, surveying, planning, supervision, testing, or observation of construction or construction of an improvement to real property more than 10 years after the substantial completion of the development or improvement for any of the following: [p] (1) Any latent deficiency in the design, specification, surveying, planning, supervision, or observation of construction or construction of an improvement to, or survey of, real property. [p] (2) Injury to property, real or personal, arising out of any such latent deficiency.... [p] (g) The 10-year period specified in subdivision (a) shall commence upon substantial completion of the improvement, but not later than the date of one of the following, whichever first occurs: [p] (1) The date of final inspection by the applicable public agency. [p] (2) The date of recordation of a valid notice of completion. [p] (3) The date of use or occupation of the improvement. [p] (4) One year after termination or cessation of work on the improvement. [p] The date of substantial completion shall relate specifically to the performance or furnishing [sic] design, specifications, surveying, planning, supervision, testing, observation of construction or construction Iservices by each profession or trade rendering services to the improvement." (§ 337.15, subds. (a), (g) [emphasis added].)

A statute should be interpreted so as to effectuate its apparent purpose. (Delaney v. Superior Court (1990) 50 Cal.3d 785, 798, 268 Cal.Rptr. 753, 789 P.2d 934; Moyer v. Workmen's Comp. Appeals Bd. (1973) 10 Cal.3d 222, 252, 110 Cal.Rptr. 144, 514 P.2d 1224.) The legislative purpose is determined in the first instance by the language used in the statute. (Brown v. Kelly Broadcasting Co. (1989) 48 Cal.3d 711, 724, 257 Cal.Rptr. 708, 771 P.2d 406.) "If the language is clear and unambiguous there is no need for construction, nor is it necessary to resort to indicia of the intent of the Legislature." (Lungren v. Deukmejian (1988) 45 Cal.3d 727, 735, 248 Cal.Rptr. 115, 755 P.2d 299 [describing the "plain meaning" rule].) The language we have highlighted in the last sentence of subdivision (g) "relates" the concept of substantial completion to services rendered to an improvement, and it relates this concept "specifically" to the services rendered by "each" profession. It is somewhat imprecise to say that things are related without saying how they are related. But the reasonably plain meaning of this sentence is that the limitations period commences as to each profession on the date its services to the improvement are substantially complete.

Appellant offers no alternative construction of the words used in the last sentence of subdivision (g). Appellant maintains, however, that the sentence "cannot be read to eliminate" the references to "substantial completion of the improvement" in the first sentences of subdivisions (a) and (g). Appellant also suggests that our interpretation of the last sentence of subdivision (g) effectively negates subdivision (g)(4), which states that the limitations period cannot commence any later than one year "after termination or cessation of work on the improvement." Appellant reasons that subdivision (g)(4) will never come into play if the limitations period is triggered by the substantial completion of services.

"[S]tatutory sections relating to the same subject must be harmonized, both internally and with each other, to the extent possible." (Dyna-Med, Inc. v. Fair Employment & Housing Com. (1987) 43 Cal.3d 1379, 1387, 241 Cal.Rptr. 67, 743 P.2d 1323.) The last sentence of subdivision (g) is not necessarily inconsistent with subdivision (g)(4). The latter provision insures that the limitations period will begin to run at some fixed point after work on an improvement stops, even if some portion of the work is not substantially complete. However, it is difficult to reconcile the last sentence of subdivision (g) with the references elsewhere in the statute to substantial completion of the improvement. The statement in the first sentence ofsubdivision (g) that the limitations period "shall commence upon substantial completion of the improvement" poses an obvious problem for our conclusion that the limitations period can commence for a trade or profession before an improvement is substantially complete. There is at least sufficient conflict in the language of the statute to preclude application of the plain meaning rule.

If a statute "is on its face amenable to two diametrically opposed interpretations, each of which conflicts in some significant way with the words the Legislature used.... we are compelled to impute to the statute that meaning which comports with the objective the Legislature sought to achieve." (American Tobacco Co. v. Superior Court (1989) 208 Cal.App.3d 480, 485-486, 255 Cal.Rptr. 280.) "Where uncertainty exists consideration should be given to the consequences that will flow from a particular interpretation. [Citation.] Both the legislative history of the statute and the wider historical circumstances of its enactment may be considered in ascertaining the legislative intent." (Dyna-Med, Inc. v. Fair Employment & Housing Com., supra, 43 Cal.3d at p. 1387, 241 Cal.Rptr. 67, 743 P.2d 1323.)

Section 337.15 was enacted in 1971 in response to lobbying by the construction industry for statutes limiting the duration of liability for real property improvements. (See generally Boyle & Hastings, California Code of Civil Procedure Sections 337.1 and 337.15: Defective Construction Defect Statutes (1990) 21 Pacific L.J. 235, 242-243.) Numerous opinions have noted that the purpose of section 337.15 is to shield members of the construction industry from liability of indefinite duration for property damage caused by their work. (See Martinez v. Traubner (1982) 32 Cal.3d 755, 760, 187 Cal.Rptr. 251, 653 P.2d 1046; Regents of University of California v. Hartford Acc. & Indem. Co. (1978) 21 Cal.3d 624, 633, fn. 2, 147 Cal.Rptr. 486, 581 P.2d 197; Sandy v. Superior Court (1988) 201 Cal.App.3d 1277, 1285, 247 Cal.Rptr. 677; Cascade Gardens Homeowners Assn. v. McKellar & Associates (1987) 194 Cal.App.3d 1252, 1256, 240 Cal.Rptr. 113; Liptak v. Diane Apartments, Inc. (1980) 109 Cal.App.3d 762, 773, 167 Cal.Rptr. 440; Ernest W. Hahn, Inc. v. Superior Court (1980) 108 Cal.App.3d 567, 570, 166 Cal.Rptr. 644, disapproved on another point in Martinez v. Traubner, supra; Leaf v. City of San Mateo (1980) 104 Cal.App.3d 398, 404-405, 163 Cal.Rptr. 711.)

Our decision is consistent with the statutory purpose identified in these cases. A defendant's services with respect to an improvement may be completed well before the improvement itself is finished. If the...