Magnolia Square Homeowners Assn. v. Safeco Ins. Co.

• Decision Date: 31 May 1990
• Docket Number: No. H005066,H005066
• Citation: 221 Cal.App.3d 1049,271 Cal.Rptr. 1
• Court: California Court of Appeals Court of Appeals
• Parties: MAGNOLIA SQUARE HOMEOWNERS ASSOCIATION, Cross-Complainant and Appellant, v. SAFECO INSURANCE COMPANY OF AMERICA, Cross-Defendant and Respondent.

Page 1

271 Cal.Rptr. 1

221 Cal.App.3d 1049

MAGNOLIA SQUARE HOMEOWNERS ASSOCIATION, Cross-Complainant and Appellant, v. SAFECO INSURANCE COMPANY OF AMERICA, Cross-Defendant and Respondent.

No. H005066.

Court of Appeal, Sixth District, California.

May 31, 1990.

Philip E. Decker, Karin Rumstedt, Law Offices of Philip E. Decker, San Jose, for cross-complainant and appellant

Larry D. Langley, J. Penny Oliver, Law Offices of Langley & Haigh, Palo Alto, for cross-defendant and respondent.

ELIA, Associate Justice.

Magnolia Square Homeowners Association (MSHA) appeals after summary judgment was granted in favor of Safeco Insurance Company of America. We conclude that summary judgment was properly granted because MSHA's claim for losses incurred due to structural defects was barred by the 12 month limitation period set forth in the Safeco all-risk property insurance policy. The judgment is therefore affirmed.

FACTS AND PROCEDURAL BACKGROUND

Magnolia Square is a 32-unit residential condominium complex located in Mountain View, California. Each unit owner is a member of Magnolia Square Homeowners Association (MSHA).

Safeco Insurance Company provided coverage for MSHA under an all-risk property insurance policy. The coverage commenced on September 1, 1979, and was renewed on an annual basis until September 1, 1986.

In early 1978, Magnolia Square experienced extensive water leakage problems and began negotiating with the developer of the complex regarding repairs. In 1981 In April 1982, as a result of Gloskowski's report, MSHA filed suit, in action No. 496759, against the developer and other entities involved in the design and construction of the complex.

MSHA retained Walter Gloskowski, a civil engineer, to examine the building for possible construction defects. Gloskowski's report documented several problems including (1) absence of building paper; (2) improper flashings; (3) electrical problems; (4) improper nailing; (5) absence of caulking and (6) other violations of the building codes. The report also noted, "There are likely other adverse conditions which a more complete and technically exhaustive inspection might reveal."

In June 1982, MSHA retained the services of C & J Construction Company to complete certain repairs. During the course of these repairs, additional design and construction defects were observed. These defects resulted in further water intrusion and dry rot.

MSHA filed its first amended complaint (which was dated July 29, 1985 and unverified) on September 13, 1985. Included in the complaint were certain information and belief allegations listed under the subheading "STRUCTURAL DEFECTS." We set those allegations out in the footnote below. ¹

On May 20-21, 1986, MSHA's experts opened up parts of the building walls and discovered that certain structural elements called for in the project plans were missing or not built in accordance with the plans. In particular, MSHA contends that the complex was "grossly underdesigned and structurally inadequate. Actual construction amplified and worsened this underdesign by poor and improper construction of such few key structural elements as were called for on the Project plans. Both poor plans and poor construction combined again to create significant building envelope waterproofing problems which, at exterior walls, exacerbate the poor design and construction of the building's structural elements, causing very significant damage to the building envelope and exterior wall framing." Subsequent investigation confirmed that these structural deficiencies existed throughout the complex's buildings.

On August 19, 1986, MSHA's counsel notified Safeco that Magnolia Square suffered extensive structural damage and impairment so that each unit was in danger of total collapse. The letter informed Safeco that the "conditions of collapse and direct physical loss were literally built into the units during the course of construction and have been in existence continuously thereafter, ..."

On February 4, 1987, Safeco brought an action for declaratory relief seeking a determination Safeco moved for summary judgment. The trial court took judicial notice of the MSHA first amended complaint in action No. 496759, which contained allegations of structural defects. The court subsequently granted the motion based upon its determination that MSHA's claim was barred by the 12 month limitation period set forth in the Safeco policy. This provision of the policy provided, "No suit shall be brought on this policy unless the insured has complied with all of the policy provisions and has commenced the suit within one year after the loss occurs." (Emphasis added.)

that it had no duty to indemnify MSHA. On April 24, 1987, MSHA filed a general denial and a cross-complaint for tortious breach of insurance contract.

MSHA brings this appeal.

STANDARD OF REVIEW

"Since a summary judgment motion raises only questions of law regarding the construction and effect of the supporting and opposing papers, we independently review them on appeal, applying the same three-step analysis required of the trial court." (AARTS Productions, Inc. v. Crocker National Bank (1986) 179 Cal.App.3d 1061, 1064, 225 Cal.Rptr. 203.) First, we must identify the issues framed by the pleadings because the motion must respond to these allegations by establishing a complete defense or establishing that there is no factual basis for relief on any of the theories contemplated by the opponent's pleading. Second, we must decide whether facts to negate the opponent's claim and warrant judgment in the moving party's favor have been established. Finally, we must determine whether the opposition establishes that a triable, material fact exists. (Id. at pp. 1064-1065, 225 Cal.Rptr. 203.) In this regard, we note that "[a] court generally cannot resolve questions about a declarant's credibility in a summary judgment proceeding [citations], unless admissions against interest have been made which justify disregard of any dissimulation." (Id. at p. 1065, 225 Cal.Rptr. 203, citing Gray v. Reeves (1977) 76 Cal.App.3d 567, 573-574, 142 Cal.Rptr. 716.)

DISCUSSION

I. PROPRIETY OF JUDICIAL NOTICE

MSHA argues that the trial court could not take judicial notice of its first amended complaint in action No. 496759 because the complaint constituted hearsay. However, as we shall explain below, the complaint was not offered to prove the truth of the matters asserted therein. It is therefore outside the parameters of the hearsay rule.

Evidence Code section 452(d) permits the court to take judicial notice of court records. However, a court cannot take judicial notice of the truth of hearsay statements simply because the statements are part of a court record. (Ramsden v. Western Union (1977) 71 Cal.App.3d 873, 879, 138 Cal.Rptr. 426; People v. Thacker (1985) 175 Cal.App.3d 594, 598-599, 221 Cal.Rptr. 37.) As stated in Day v. Sharp (1975) 50 Cal.App.3d 904, 123 Cal.Rptr. 918, " 'A court may take judicial notice of the existence of each document in a court file, but can only take judicial notice of the truth of facts asserted in documents such as orders, findings of fact and conclusions of law, and judgments.' " (Id. at p. 914, 123 Cal.Rptr. 918, quoting Jefferson, Cal.Evid.Benchbook (1972) Judicial Notice, § 47.3, p. 840.)

Were the allegations of structural defects in the first amended complaint offered "to prove the truth of the matter stated?" (Evid.Code, § 1200.) We conclude that they were not. The complaint was offered to prove that MSHA had notice or knowledge of structural defects; it was not offered to prove that such defects in fact existed. Because the allegations were not offered to prove their truth, they are not subject to the prohibition against hearsay. (See e.g. Younger v. State Bar (1974) 12 Cal.3d 274, 286, 113 Cal.Rptr. 829, 522 P.2d 5; 1 Witkin, Cal.Evid. (3d ed.) § 593, p. 566.)

The fact that some of the allegations were made on information and belief does not alter our conclusion. Information and belief is a "common legal term used to indicate that 'the allegation is not based on firsthand knowledge of the person making the allegation, but that person nevertheless, in good faith, believes the allegation to be true.' " (City of Santa Cruz v. Municipal Court (1989) 49 Cal.3d 74, 93, fn., 9, 260 Cal.Rptr. 520, 776 P.2d 222; quoting Black's Law Dict., (5th ed. 1979) at p. 701.) Thus, an allegation on information and belief is hearsay. (Star Motor Imports, Inc. v. Superior Court (1979) 88 Cal.App.3d 201, 204, 151 Cal.Rptr. 721.) If offered to prove its truth, an information and belief allegation in a complaint could pose a double hearsay problem: the complaint would be hearsay and the statement on information and belief would also be hearsay. However, we need not concern ourselves with that dilemma because, as previously noted, the allegations of structural defects here were offered to prove only that MSHA had notice of such defects. And the fact that MSHA's notice was not based upon firsthand knowledge is of no particular significance since it is the fact of the notice, rather than its basis, which is important.

This case is distinguishable from Day v. Sharp, supra, 50 Cal.App.3d 904, 123 Cal.Rptr. 918 because the statement in Day was offered to prove its truth. In Day, court records included a statement, which was made on information and belief, concerning an amount of money allegedly received by the defendant. The plaintiff sought to use the records to prove that the defendant had received that particular amount. The court concluded that the statement "was clearly hearsay which should have been disregarded by the trial court." (Id. at p. 915, 123 Cal.Rptr. 918, fn. omitted.)

In sum, we conclude that the allegations of the first amended complaint in action No. 496759 did not constitute hearsay because they were not offered to prove the truth of the matter asserted. Thus, the trial court's decision to take judicial...