State Farm Gen. Ins. Co. v. Oetiker, Inc.

58 Cal.App.5th 940

273 Cal.Rptr.3d 25

STATE FARM GENERAL INSURANCE COMPANY, Plaintiff and Appellant,

v.OETIKER, INC., Defendant and Respondent.

2d Civ. No. B302348

Court of Appeal, Second District, Division 6, California.

Filed December 18, 2020

Watkins & Letofsky, Jeffrey A. Korinko, Michael Long, Santa Ana; Grotefeld Hoffmann, Jordan Everakes and Daniel W. Berglund for Plaintiff and Appellant.

Williams|Palecek Law Group, Jason P. Williams ; Noma Law Firm and Sally Noma for National Association of Subrogation Professionals, Amici Curiae on behalf of Plaintiff and Appellant.

Selman Breitman, Elaine K. Fresch, Los Angeles, and Melanie M. Smith, San Diego, for Defendant and Respondent.

TANGEMAN, J.

In Aas v. Superior Court (2000) 24 Cal.4th 627, 632, 101 Cal.Rptr.2d 718, 12 P.3d 1125 ( Aas ), our Supreme Court held that homeowners were barred from proceeding with negligence claims for construction defects absent a showing of property damage or personal injury. In 2002, the Legislature abrogated Aas when it passed the Right to Repair Act (the Act) ( Civ. Code, § 895, et seq. ).¹

The Act codifies a comprehensive reform to construction defect litigation applicable to residential dwellings in California. (Stats. 2002, ch. 722, § 3; McMillin Albany LLC v. Superior Court (2018) 4 Cal.5th 241, 246-247, 227 Cal.Rptr.3d 191, 408 P.3d 797 ( McMillin ).) Among other things, "[t]he Act sets forth detailed statewide standards that the components of a dwelling must satisfy. It also establishes a prelitigation dispute resolution process that affords builders notice of alleged construction defects and the opportunity to cure such defects, while granting homeowners the right to sue for deficiencies even in the absence of property damage or personal injury." ( McMillin , at p. 247, 227 Cal.Rptr.3d 191, 408 P.3d 797.) It also provides an outside limit of 10 years for filing a lawsuit for latent construction defects. (§ 941.)

In McMillin , supra , 4 Cal.5th 241, 227 Cal.Rptr.3d 191, 408 P.3d 797, a builder was sued for defective construction under multiple theories, based both on common law (e.g., negligence) and the Act. The plaintiffs later dismissed the statutory causes of action in an attempt to avoid the prelitigation dispute resolution requirements of the Act. Our Supreme Court rejected that attempt, holding that the Act was intended to displace the common law and was the "virtually exclusive remedy not just for economic loss but also for property damage arising from construction defects." ( Id. at p. 247, 227 Cal.Rptr.3d 191, 408 P.3d 797.)

Here, Oetiker raises the same argument, contending that the Act applies to bar State Farm's complaint. But unlike McMillin , here we are dealing with a lawsuit against an individual product manufacturer whose allegedly defective part failed after it was incorporated into the structure, causing damage to the residence. Although non-builders such as product manufacturers are subject to the Act under certain circumstances, the Act treats builders and non-builders differently. McMillin is therefore distinguishable.

Here we hold that as applied to non-builders such as Oetiker, the Act covers claims based on negligence and breach of contract, but not those based on strict liability and breach of implied warranty. We accordingly reverse and remand with directions to allow the claims based on strict liability and implied warranty to proceed.²

FACTUAL AND PROCEDURAL HISTORY

James and Jennifer Philson insured their residence with State Farm General Insurance Company (State Farm). Construction of their home was substantially completed, and a Notice of Completion recorded, in 2004.

Oetiker, Inc. was the manufacturer of a stainless steel ear clamp that was attached to plumbing pipes in the Philson's home. In 2016, significant water damage occurred at the home. The Philsons filed a claim under their policy, and State Farm paid the claim.

In 2018, State Farm brought a subrogation action against Oetiker to recover the amount State Farm paid the Philsons under their policy. State Farm alleged the home was "damaged by a water leak from the failure of a defective stainless steel ear clamp on a water PEX fitting" and that the clamp was "defective when it left the control of [Oetiker]." The complaint included causes of action for negligence, strict products liability, and breach of implied warranty.

Oetiker moved for summary judgment. It argued the Act's 10-year statute of repose for latent defects barred State Farm's lawsuit. (§ 941.) State Farm countered that the Act did not apply to its action because it alleged a defect only in a "manufactured product" (i.e., the ear clamp). (§ 896, subd. (g)(3)(E).)

The trial court granted Oetiker's motion for summary judgment. The court found that "Oetiker has established that Plaintiff's claims for property damage ... fall within Civil Code section 896(a)(14),(15), that the exception set forth in Civil Code section 896(g)(3)(E) does not apply, and that this action is therefore subject to the provisions of the Act." Thus, the court found the Act's 10-year statute of repose barred the action.

DISCUSSION

State Farm contends the trial court erred when it granted the motion for summary judgment because the Act does not apply to its lawsuit. We agree that the Act does not apply to the strict liability and breach of implied warranty causes of action, but conclude otherwise as to the negligence cause of action.³

Standard of Review

Summary judgment is appropriate "if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." ( Code Civ. Proc., § 437c, subd. (c).) The moving party bears the initial burden of showing that the opposing party cannot establish one or more elements of the cause of action, or that there is an affirmative defense to it. ( § 437c, subd. (o ) ; Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850, 107 Cal.Rptr.2d 841, 24 P.3d 493 ( Aguilar ).) If the moving party makes one of the required showings, the burden shifts to the opposing party to establish a triable issue of material fact. ( Aguilar , at p. 850, 107 Cal.Rptr.2d 841, 24 P.3d 493.)

Our review is de novo. ( Knapp v. Doherty (2004) 123 Cal.App.4th 76, 84, 20 Cal.Rptr.3d 1.) We liberally construe the opposing party's evidence and resolve all doubts in their favor. ( Lyle v. Warner Brothers Television Productions (2006) 38 Cal.4th 264, 274, 42 Cal.Rptr.3d 2, 132 P.3d 211.) We consider all evidence in the moving and opposition papers, except that to which objections were properly sustained. ( Yanowitz v. L'Oreal USA, Inc. (2005) 36 Cal.4th 1028, 1037, 32 Cal.Rptr.3d 436, 116 P.3d 1123.)

Right to Repair Act

The Act consists of five chapters. "Chapter 1 establishes definitions applicable to the entire title. ( § 895.) Chapter 2 defines standards for building construction. ( §§ 896 - 897.) Chapter 3 governs various builder obligations, including the warranties a builder must [or may] provide. (§§ 900-907.) Chapter 4 creates a prelitigation dispute resolution process. (§§ 910-938.) Chapter 5 describes the procedures for lawsuits under the Act. (§§ 941-945.5.)" ( McMillin , supra , 4 Cal.5th at p. 250, 227 Cal.Rptr.3d 191, 408 P.3d 797.)

Section 896 is in Chapter 2. It provides that in "any action seeking recovery of damages arising out of, or related to deficiencies in, the residential construction ..., a builder, and to the extent set forth in Chapter 4 ... [an] individual product manufacturer ... shall, except as specifically set forth in this title, be liable for, and the claimant's claims or causes of action shall be limited to violation of, the following standards, except as specifically set forth in this title. This title applies to original construction intended to be sold as an individual dwelling unit." ( § 896, emphasis added.)

Section 896 lists the applicable standards for residential construction, including those "[w]ith respect to water issues." ( § 896, subd. (a).) Water issue standards require that the "lines and components of the plumbing system, sewer system, and utility systems shall not leak" (id. at subd. (a)(14)) and that the "[p]lumbing lines, sewer lines, and utility lines shall not corrode so as to impede the useful life of the systems" (id. at subd. (a)(15)).

Section 896 also includes exceptions to the Act. As relevant here, one exception provides: "This title does not apply in any action seeking recovery solely for a defect in a manufactured product located within or adjacent to a structure." ( § 896, subd. (g)(3)(E).) A " ‘manufactured product’ " is defined as "a product that is completely manufactured offsite." (Id. at subd. (g)(3)(C).) Manufactured products include plumbing products and fixtures. (Id. at subd. (g)(3)(A).)

Section 897 states that the standards in section 896 were "intended to address every function or component of a structure. To the extent that a function or component of a structure is not addressed by these standards, it shall be actionable if it causes damage." ( § 897.)

As pertains to an "individual product manufacturer," section 936 (in Chapter 4) states that "[e]ach and every provision of the other chapters of this title appl[ies] ... to the extent that ... individual product manufacturers ... caused, in whole or in part, a violation of a particular standard as the result of a negligent act or omission or a breach of a contract .... However, the negligence standard in this section does not apply to any ... individual product manufacturer ... with respect to claims for which strict liability would apply." (Emphasis added.)

Section 943 (in Chapter 5) discusses the exclusivity of the Act. It provides that "except as provided in this title, no other cause of action for a claim covered by this title or for damages recoverable under Section 944 is allowed." Section 944 discusses recoverable damages, which include "damages for the reasonable value of repairing any...