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Pine Terrace Apartments, L.P. v. Windscape

January 12, 2009; as modified February 6, 2009

PINE TERRACE APARTMENTS, L.P., PLAINTIFF AND APPELLANT,
v.
WINDSCAPE, LLC, ET AL., DEFENDANTS, CROSS-COMPLAINANTS AND APPELLANTS;
JEFFREY SCOTT, INC., ET AL., CROSS-DEFENDANTS AND RESPONDENTS.



APPEAL from a judgment of the Superior Court of Fresno County. Alan M. Simpson, Judge. (Super. Ct. No. 04CECG01462).

The opinion of the court was delivered by: Dawson, J.

CERTIFIED FOR PARTIAL PUBLICATION*fn1

OPINION

This appeal involves allegations of latent construction defects and the application of the 10-year statute of limitations set forth in Code of Civil Procedure section 337.15.*fn2

The buyer of an apartment complex sued the developer and seller after discovering that all of the windows in the complex lacked flashing, which led to water and mold damage. The developer and seller filed a cross-complaint for indemnification against various subcontractors.

Three subcontractors moved for summary judgment on the cross-complaint on the ground it was barred by section 337.15. The superior court granted their motions. The developer and seller, as well as the buyer, appealed.

We reach the following conclusions. First, the exemption from the 10-year statute of limitations for "actions based on willful misconduct" (§ 337.15, subd. (f)) applies to cross-complaints for indemnity. Second, a willful misconduct claim may be made in a cross-complaint by way of incorporating by reference allegations contained in the complaint. Third, because of these two conclusions and because triable issues of material fact regarding the willful misconduct claim are present here, the trial court erred in granting the subcontractors‟ motions for summary judgment.

Accordingly, the judgment will be reversed and the matter remanded for further proceedings.

FACTS

Parties

Plaintiff Pine Terrace Apartments, L.P. (Buyer), is a California limited partnership. Buyer purchased a 256-unit apartment complex located at 353 and 373 West Nees Avenue, Fresno, California, commonly known as the Windscape Apartments (Apartments). Cal-Neva Asset Management Co., Inc. is the general partner of Buyer.

Defendants and cross-complainants are (1) Windscape, LLC, a Washington limited liability company; (2) Windscape, L.P., a California limited partnership; (3) Andrade Development Company, a California corporation; and (4) Eugene J. Andrade, an individual who (a) is the managing member of Windscape, LLC, (b) is the president of Andrade Development Company, and (c) was alleged to have been the general partner of Windscape, L.P. For purposes of this opinion, these four parties will be referred to collectively as Developer-Seller.

Windscape, L.P. was the original owner and developer of the Apartments. Andrade Development Company was the general contractor and builder. Windscape,

L.P. transferred the Apartments to Windscape, LLC, which became the owner of record of the Apartments.

Cross-defendants are (1) Jeffrey Scott, Inc., doing business as Western Products Co. (Western), (2) Avila Cement, and (3) Weber-Iness Associates (collectively, Subcontractors).

Apartments

Construction of the Apartments began in 1989 and ended in 1991. Weber-Iness Associates, an architecture firm, contracted to prepare the plans for the construction of the Apartments. The written contract for the architectural services to be provided by Weber-Iness Associates expressly excluded any construction or supervision of construction.

Avila Cement contracted with Developer-Seller to supply concrete foundations and flatwork for the Apartments.

Western manufactured and installed the windows for the Apartments pursuant to an oral agreement with Developer-Seller. Western admits that it installed the windows without flashing paper, but asserts that its work complied with the building code and with the standard practice at that time.

A notice of completion for the 373 West Nees parcel was recorded with the Fresno County Recorder‟s Office on October 31, 1990. The notice of completion for the 353 West Nees parcel was recorded on May 1, 1991.

In 2002, Buyer and Developer-Seller entered agreements for the sale of the Apartments. Escrow for the sale closed on May 13, 2003.

Alleged Defects

Buyer alleges that, after the sale, it became aware of numerous and pervasive defects and damage throughout the Apartments. The alleged defects include damaged and defective roofing, balconies, flashing, trim, pavement, and sidewalks. Buyer expressed particular concern with water and mold damage caused by the absence of any flashing around all windows in the Apartments. Buyer asserts that Eugene J. Andrade knew flashing had not been installed at the Apartments and did not disclose the absence of flashing to Buyer.

Buyer presented the opinion of Adam Posard regarding the absence of flashing. Posard is licensed by California as an architect and a general building contractor. Posard inspected the Apartments and viewed photographs taken by an architect and contractor who performed repairs to the Apartments in 2006. Posard stated that flashing has been used by builders for generations and is required by the Uniform Building Code. He stated his opinion that "the only reason the General Contractor and its subcontractors would omit the required flashing is to save money, at the expense and harm to any subsequent purchaser of the property." In Posard‟s opinion, the omission of the flashing was the result of willful misconduct.

In its separate statement, Western asserted that its "installation of the windows without flashing paper was open and obvious to any person monitoring, inspecting or working on the job site." Developer-Seller disputed this assertion of fact, contending that the omission was not open and obvious because Eugene J. Andrade "had no knowledge that flashing paper could be installed around windows until after the pending case was filed." In contrast, Buyer did not dispute Western‟s assertion of fact but made evidentiary objections to the declarations Western filed to support its assertion.

Western‟s moving papers and the opposition papers indicate that the parties dispute (1) whether Western‟s installation of windows complied with the Uniform Building Code and the City of Fresno Building Code and (2) whether, at the time of installation, the City of Fresno required flashing paper to be installed with the windows. Those papers also establish, and the parties do not dispute, that City of Fresno officials inspected and approved the window installation, although Buyer objected to the evidence Western submitted to support this fact.

PROCEEDINGS

Pleadings

Buyer filed a complaint against Developer-Seller and Does 1 through 1000 on May 17, 2004. On October 15, 2004, Buyer filed a first amended complaint (FAC) that included claims for negligence, strict liability, breach of contract, breach of implied and express warranty, bond liability, express contractual indemnity, and concealment arising out of the construction and sale of the Apartments.

Buyer alleged that Developer-Seller and the Doe defendants defectively built the Apartments and their work was so defective that it "was of a quality amounting to reckless disregard and/or willful misconduct."

Developer-Seller filed a cross-complaint, naming as cross-defendants over a dozen subcontractors that worked on the Apartments, including Western, Avila Cement and Weber-Iness Associates. Developer-Seller‟s operative pleading against the Subcontractors is its first amended cross-complaint for declaratory relief, implied equitable indemnity, and express contractual indemnity, which was filed October 6, 2006 (Cross-Complaint).

The Cross-Complaint does not use the term "willful misconduct," but does incorporate by reference the allegations of the FAC. Further details regarding the allegations of the FAC and the Cross-Complaint are set forth in part III.B, post.

Motions for Summary Judgment

In February 2007, Developer-Seller and Western both filed motions for summary judgment. Developer-Seller asserted the claims in Buyer‟s FAC were barred by the 10-year statute of limitations set forth in section 337.15. Similarly, Western asserted Developer-Seller‟s Cross-Complaint against it was barred by section 337.15 because the FAC and Cross-Complaint were filed more than 10 years after completion of the Apartments.

The superior court chose to hear Developer-Seller‟s motion for summary judgment before Western‟s motion for summary judgment.

Developer-Seller's Motion

Buyer opposed Developer-Seller‟s motion for summary judgment by contending that the 10-year limitations period does not apply (1) in cases of willful misconduct, (2) to persons in actual possession or control of the property at any time a defect proximately causes damage to the property, or (3) in cases of fraudulent concealment. Buyer also disputed that notices of completion were filed in 1990 and 1991 on the grounds that the notices constituted hearsay and had not been properly authenticated, and that judicial notice could not be taken of their contents.

Buyer also submitted the declaration of Posard to support its argument that a triable issue of material fact existed regarding whether Developer-Seller‟s actions constituted willful misconduct.

In May 2007, the superior court determined (1) Developer-Seller had not met its burden of establishing when the Apartments were substantially completed and (2) triable issues of material fact existed regarding the willful misconduct exemption and the owner-in-possession exemption from the 10-year statute of limitations. Specifically, the court stated Buyer raised a triable issue of fact regarding whether Developer-Seller‟s failure to install flashing amounted to willful misconduct. The court denied Developer-Seller‟s motion for summary judgment but granted summary adjudication as to four of the 13 causes of action in the FAC.

Subcontractors' Summary Judgment Motions

In June 2007, the superior court heard the Subcontractors‟ motions for summary judgment. The court sustained evidentiary objections regarding foundation and authenticity made by Developer-Seller to the copies of the notices of completion submitted by the Subcontractors in support of their motions. Based on its evidentiary rulings regarding the notices of completion, the court concluded that the Subcontractors had failed to establish that the 10-year limitations period expired before the filing of the complaint. Therefore, the court denied the Subcontractors‟ motions for summary judgment.

On July 2, 2007, Avila Cement filed a petition for a writ of mandate with this court (Avila Cement v. Superior Court, F053192), asserting that the superior court had erred by excluding the notice of completion from evidence. On July 10, 2007, this court issued an alternative writ directing the superior court either to show cause why the requested relief should not issue or to (1) set aside its June 2007 order denying the motion to take judicial notice and its related order denying Avila Cement‟s ...


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