Valley Circle Estates v. Vtn Consolidated, Inc.

CourtUnited States State Supreme Court (California)
Citation189 Cal.Rptr. 871,659 P.2d 1160,33 Cal.3d 604
Decision Date24 March 1983
Parties, 659 P.2d 1160 VALLEY CIRCLE ESTATES et al., Cross-Complainants and Appellants, v. VTN CONSOLIDATED, INC., Cross-Defendant and Respondent. L.A. 31661.

Page 871

189 Cal.Rptr. 871
33 Cal.3d 604, 659 P.2d 1160
VALLEY CIRCLE ESTATES et al., Cross-Complainants and Appellants,
v.
VTN CONSOLIDATED, INC., Cross-Defendant and Respondent.
L.A. 31661.
Supreme Court of California,
In Bank.
March 24, 1983.

Page 872

[33 Cal.3d 606] John J. Tary, Robert R. Ronne and Hagenbaugh & Murphy, Los Angeles, for cross-complainants and appellants.

Robert L. Bachman, Irvine, Michael T. Fogarty and McDonough, Holland & Allen, Sacramento, for cross-defendant and respondent.

James P. Corn, Mary A. O'Gara and Turner & Sullivan, Sacramento, as amici curiae on behalf of cross-defendant and respondent.

REYNOSO, Justice.

Does Code of Civil Procedure section 337.15 permit a general contractor tort defendant to file a cross-complaint for equitable indemnity against a subcontractor who cannot otherwise be reached under the limitations period of the statute in a direct action for damages? We hold that such a cross-complaint for indemnity is proper.

On March 23, 1978, plaintiffs Fred M. and Ruth S. Zeleznick filed a complaint for damages to their home resulting from soil subsidence. The defendants in the suit include the general contractor, developer and seller of the residence, [33 Cal.3d 607] Valley Circle Estates (Valley Circle). Valley Circle is a partnership comprised of numerous entities and individuals who have been separately sued in the action. Defendants also include the civil engineer with which Valley Circle contracted to prepare the grading plan and perform surveying services, VTN Consolidated, Inc. (VTN). The completion of VTN's services was certified on April 5, 1966. A notice of Valley Circle's completion of the residence was signed March 25, 1968, and recorded March 28, 1968.

In their complaint, the Zeleznicks allege that defendants failed to exercise due care in the grading and compaction of plaintiffs' lot, the construction of their residence, and the installation of drainage pipes. As a result, the Zeleznicks claim, their yard became saturated during rainstorms and began subsurface movement, placing stress on the property's sewer lines and on the structure itself. As the condition worsened,

Page 873

cracks began to appear on the floor and [659 P.2d 1162] walls of the garage and in the sidewalk, and the adjoining yard area began to sink and subside. Other walls were forced upwards, causing damage to the interior walls and floors of the house, and causing the floor of the upper story of the residence to tilt downward.

The Zeleznicks allege that as a consequence of these impairments, the market value of their home has been reduced from $150,000 to $60,000. They estimate that this $90,000 reduction in market value could be restored by remedial work, repair and reconstruction costing $40,000. They further claim damages to the value of use and occupancy of the residence of $30,000, plus Mr. Zeleznick's loss of wages while making repairs of $2,000. The total amount of damages claimed is $72,000.

Valley Circle filed a cross-complaint for declaratory relief to determine its equitable indemnity rights against VTN. Subsequently, VTN filed a motion for summary judgment to compel its dismissal from the direct action. VTN asserted that, as to it, the action, filed 12 years after completion of its services, was untimely under the 10-year statute of limitations of Code of Civil Procedure section 337.15, subdivision (a). 1 The trial court granted VTN's motion.

[33 Cal.3d 608] After its dismissal from the direct action, VTN filed a motion for summary judgment seeking dismissal from Valley Circle's cross-complaint for equitable indemnity, again relying on section 337.15. The trial court rendered a summary judgment in favor of VTN based on section 337.15, subdivision (c), citing Regents of University of California v. Hartford Acc. & Indem. Co. (1978) 21 Cal.3d 624, 639, footnote 9, 147 Cal.Rptr. 486, 581 P.2d 197. The trial court denied Valley Circle's motion for reconsideration.

Valley Circle contends that under section 337.15, subdivision (c), a general contractor may file a cross-complaint for indemnity against a subcontractor more than 10 years after the subcontractor's services have been substantially completed, provided the main

Page 874

cause of action against the general contractor[659 P.2d 1163] was itself filed within the 10-year statute of limitations. Valley Circle bases this contention on a literal reading of subdivision (c). For the reasons discussed below, we agree.
I

We are guided by the fundamental rules of statutory construction. A court " ' "should ascertain the intent of the Legislature so as to effectuate the purpose of the law." ' " (Cossack v. City of Los Angeles (1974) 11 Cal.3d 726, 732, 114 Cal.Rptr. 460, 523 P.2d 260, quoting People v. Superior Court (1969) 70 Cal.2d 123, 132, 74 Cal.Rptr. 294, 449 P.2d 230.) To determine such intent, the court must turn first to the language of the statute itself. (People v. Knowles (1950) 35 Cal.2d 175, 182, 217 P.2d 1.) "Excepting when clearly otherwise intended or indicated, words in a statute should be given their ordinary meaning and receive a sensible construction in accord with the commonly[33 Cal.3d 609] understood meaning thereof. [Citation.]" (county oF loS angeles v. frisbie (1942) 19 cal.2d 634, 642, 122 P.2d 526.) "Legislative enactments are to be construed in accordance with the ordinary meaning of the language used, if the words are not ambiguous and do not lead to an absurdity. [Citations.]" (Centinela Valley Secondary Teachers Assn. v. Centinela Valley Union High Sch. Dist. (1974) 37 Cal.App.3d 35, 42-43, 112 Cal.Rptr. 27.)

Applying these principles to the case before us, we find that the language of section 337.15, subdivision (c), is clear, unambiguous, and reasonable. This subdivision provides that "an action for indemnity" is included in those direct actions set forth in subdivision (a) which may not be brought against any person, or the surety of a person, who develops or improves real property, more than 10 years after the substantial completion of such development or improvement. It permits, however, one clear exception: "except that a cross-complaint for indemnity may be filed pursuant to subdivision (b) of Section 428.10 2 in an action which has been brought within the time period set forth in subdivision (a) of this section." (Emphasis added.)

When it was introduced in the Legislature, subdivision (c) of the original bill did not contain this exception clause. (Assem. Bill No. 2742 (1971) Reg.Sess.) The clause was added by amendment and the subdivision enacted in its present form. (Stats.1971, ch. 1569, § 1, pp. 3148-3149.) Had this clause not been added, subdivision (c) would have required that the actions directly subject to the 10-year limitation period of the statute include all actions for indemnity. However, the exception clause created a clear distinction between direct actions for indemnity and cross-complaints for indemnity.

We read this language to mean that a cross-complaint for indemnity may be filed more than 10 years after the alleged indemnitor has substantially completed his services, provided that the underlying action was itself brought within the 10-year limitation period of the statute.

Thus, a defendant timely sued under section 337.15, subdivision (a), may file under subdivision (c) a cross-complaint for indemnity against a third party who could not otherwise be reached by a direct action for indemnity filed by the defendant, or by a direct suit for damages filed by the plaintiff.

[33 Cal.3d 610] VTN advances both statutory and decisional arguments to support its contention that when a direct action against a party is barred by the 10-year limitation period of section 337.15, a cross-complaint for indemnity against that party is also barred. VTN

Page 875

first points out that subdivision (a) bars [659 P.2d 1164] actions for damages against "any person," or the surety of "a person," who develops or improves real property more than 10 years after substantial completion of their development or improvement. VTN then argues that, as used in subdivision (c), "a person" should be similarly protected against all claims, direct or derivative, for indemnity.

While we agree that the term "person" is used consistently throughout the statute, we disagree with VTN's conclusion. It ignores the plain language of the second portion of subdivision (c) which provides for an exception to the application of the statute's limitation period for cross-complaints for indemnity, provided such cross-complaints are brought in an underlying action which itself has been timely filed under subdivision (a).

VTN next argues that the holding in Liptak v. Diane Apartments, Inc. (1980) 109 Cal.App.3d 762, 167 Cal.Rptr. 440, supports its interpretation that all claims for indemnity are barred more than 10 years after a developer or improver of real property has ceased its involvement in a project. In Liptak, the court held that in a direct action for damages under section 337.15, the commencement of the 10-year statute of limitations must be independently determined for each developer and improver according to the date on which each person's development or improvement was substantially completed. This holding was subsequently incorporated into section 337.15 as subdivision (g). (Stats.1981, ch. 88, § 1, pp. 151-152.) However, Liptak is inapplicable to the interpretation of subdivision (c) as that case did not involve an action for indemnity. The decision in Liptak, as set forth in subdivision (g), provides guidance only in determining the date for commencing the 10-year statute of limitations applicable to the direct actions set forth in subdivision (a), including, as defined by the first portion of subdivision (c), direct actions for indemnity. VTN's interpretation of section 337.15 would require us to interpret the "except" language of subdivision (c) as unnecessary. "[Statutory]...

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