Plaintiffs’ Bar Hits A Wall When It Comes to “Access” Damages

Jorge Cruz-Bustillo | Chartwell Law

In Florida, for years, the plaintiffs’ bar has been filing first-party property law suits for ensuing water damages caused by the failure of cast-iron pipes. In those cases, in which there is no evidence of interior water damages, the plaintiffs’ bar has been claiming repair costs associated with “access” (i.e., tear out and replacement) through the flooring to repair a plumbing drain line. Of course, with this “access,” the plaintiffs’ bar seeks recovery for damages based on matching which could include continuous flooring, baseboards, drywall, painting, etc.

A typical homeowner’s insurance policy in Florida will have a “perils insured” provision similar to the following:

“We insure against risk of direct loss to property described in Coverages A and B only if that loss is a physical loss to property; however, we do not insure loss:***

2. caused by:***

h. (1) wear and tear . . . deterioration; ***

If any of these cause water damage not otherwise excluded, from a plumbing . . . system . .., we cover loss caused by the water including the cost of tearing out and replacing any part of a building necessary to repair the system or appliance. We do not cover loss to the system or appliance from which this water escaped.”

The last paragraph of the “perils insured” provision is referred to as the “ensuing loss” exception. This “ensuing loss” exception provides coverage for any resulting water damage caused by the discharge of water from a plumbing system or household appliance, that is not otherwise excluded under the policy. This “ensuing loss” exception also includes “the cost of tearing out and replacing any part of the building necessary to repair the system.”  The latter provision is known, in first-party property litigation, as “access.”  

In Homeowners Choice Property & Casualty v. Maspons, 211 So. 3d 1067,1069 (Fla. 3d DCA 2017) the Third District Court of Appeal clarified that a homeowner’s insurance policy does not cover “access” through the flooring unless the plaintiff can prove that there are ensuing water damages caused by a back-up covered under the Policy.

In Maspons, supra, the plaintiff furnished a video showing a “break” in the drain line. The insurance carrier retained a plumbing company that inspected and found a “large hole” in the drain line. The trial court entered summary judgment in favor of the insureds. Id. at 1068 (“Based upon this state of there cord, the trial court found there was no coverage under the insurance policy for the repair and replacement of the pipe, but that Homeowners Choice was responsible for the greater cost of tearing out and replacing the slab to make the repair.”)

The Third District reversed and remanded directing the trial court to enter summary judgment in favor of Homeowners Choice. Id. at 1070. The Third District held: “At the time of the summary judgment proceeding . . . There was no evidence that the water exiting the pipe had caused any damage to its surrounding.”  Id. Based on the plain language of the “perils insured” provision, the Third District concluded that ensuing water damages was a necessary condition precedent to coverage for “access” through the flooring (even though the camera inspection did in-fact show that the drain line was broken).

The Third District’s analysis is important for the defense bar to understand. Specifically, the Third District wrote: “Any analysis must begin with the language of the insurance contract.” Id. at 1069. “We give the undefined words of an insurance contract their ordinary meaning, just as we would with any other type of contract.” Id. “‘Direct’ and ‘physical’ modify loss and impose the requirement that the damage be actual.” Id. “Examining the plain language of the insurance policy in this case, it is clear that the failure[i.e. break and/or large hole identified in Maspons] of the drainpipe to perform its function constituted a ‘direct’ and ‘physical’ loss to the property within the meaning of the policy.” Id. The Third District continued:

“However, the last paragraph of the “perils insured” provision, often referred to the “ensuing loss” provision of the policy, cautions that we not prematurely abort our inquiry. That clause provides the homeowner with coverage for an‘ ensuing’ loss that is not specifically excluded. Thus, while the exclusion for“[w]ear and tear” or “deterioration” might mean, and this case does mean by virtue of the Maspons’ concession that Homeowners Choice is not obligated to compensate the Maspons for their corroded drain pipe, if the Maspons suffered consequential loss as a result of the corroded pipe and that consequential or “ensuing” loss is not excluded under another provision of the policy, the loss is covered.” (emphasis added) [citations omitted]. Id. at 1070.

“Happily, for us, we can quickly conclude the interpretative gymnastics in which we are engaged at this point.” Id. “There was no evidence that the water exiting the pipe had caused any damages to its surroundings.” Id. “Thus, the trial court erred by entering judgment against Homeowners Choice for the cost of the repair and replacement of the slab necessary to reach the broken pipe at this time.” Id. “For this reason, we reverse and remand this case for entry of judgment in favor of Homeowners Choice Insurance Company, but without prejudice to the Maspons filing another claim of loss at a later date, if appropriate.” Id.

In Maspons, ensuing water damages were covered. The Third District, however, found that there was no evidence of ensuing water damage. Since the necessary predicate condition precedent did not exist, the Third District directed the trial court to enter summary judgment in favor of Homeowners Choice. For those Florida policies which contain a “water back-up” exclusion, under Maspons “access ”damages would never be covered.

Contractor Loses Effort to Bind Remote Home Purchaser to Arbitration Clause

Jon Paul Hoelscher and Amendeep S. Kahlon | Buildsmart

On December 8, 2020, in Taylor Morrison of Texas, Inc. v. Kohlmeyer, a Texas Court of Appeals rejected a contractor’s appeal of a trial court order denying the contractor’s motion to compel arbitration in a home construction defect dispute. The appellate court concluded that the theories of direct benefits estoppel and implied assumptions did not permit the contractor to bind a subsequent purchaser to mandatory arbitration required under the original purchase agreement.

In 2013, the contractor, Taylor Morrison, executed a purchase agreement with a homeowner for the construction of a new home in League City, Texas. The purchase agreement included a mandatory arbitration provision and provided that it may not be assigned without the prior written consent of Taylor Morrison. In March 2016, the homeowner sold the house, and, later that year, the property was sold again to the Kohlmeyers. In 2018, the Kohlmeyers sued Taylor Morrison “asserting that the house had a substantial amount of mold growth throughout resulting from numerous water and moisture sources caused by construction defects.” Taylor Morrison moved to compel arbitration under the doctrines of equitable or direct benefits estoppel and implied assumption, but the trial court denied the motion. Taylor Morrison then appealed.

The appellate court confirmed the trial court’s decision. The appellate court acknowledged that an arbitration agreement may bind a non-signatory such as the Kohlmeyers but only when one of the following six theories — none of which were applicable here — applies: “(1) incorporation by reference, (2) assumption, (3) agency, (4) alter ego, (5) equitable estoppel, and (6) third-party beneficiary.” Taylor Morrison only argued assumption and equitable estoppel applied in the instant action.

With respect to estoppel, Taylor Morrison contended that the Kohlmeyers’ claim sought a direct benefit of the original purchase agreement relating to the quality of workmanship and construction. According to the court, for Taylor Morrison’s direct benefits estoppel theory to apply, Taylor Morrison must show that the Kohlmeyers’ claims depended on and were unable to stand independently of the purchase agreement. Mere relation of the claims to the purchase agreement was insufficient to apply the estoppel theory to bind the Kohlmeyers to arbitration. The appellate court concluded that the Kohlmeyers’ claims did not arise solely from the purchase agreement because the Kohlmeyers did not allege breach of the purchase agreement, the economic loss doctrine could not be applied to bind the Kohlmeyers on a contract they never signed, and the Kohlmeyers’ claims for breach of implied warranties did not arise solely from the purchase agreement.

The appellate court also rejected Taylor Morrison’s argument for binding the Kohlmeyers to the arbitration clause under the theory of implied assumption because the purchase agreement had not been assigned to the Kohlmeyers. According to the court, an implied assumption of contract obligations arises when a contract is assigned to an assignee (here, the Kohlmeyers) and the benefit received by the assignee is so entwined with the burden imposed by the assignor’s contract that the assignee is estopped from denying assumption and the assignee would otherwise be unjustly enriched. Taylor Morrison argued the implied warranties in the purchase agreement had been automatically assigned to the Kohlmeyers when they bought the house and that the benefits of the implied warranties under the purchase agreement were entwined with the arbitration provision.

The court disagreed. Per the court, the alleged automatic assignment of the implied warranties was inapposite because there was no dispute that the purchase agreement (i.e., the contract) had not been assigned to the Kohlmeyers. Indeed, the appellate court noted that assignment of the purchase agreement was contingent on Taylor Morrison’s written consent, which the record showed had not been provided. Therefore, the court rejected the implied assumption theory and held that the Kohlmeyers could not be compelled to arbitrate.

Lessons from Taylor Morrison

Since arbitration is typically an animal of contract, it is important for contractors to understand how their arbitration clauses will be interpreted by a court. While attempts to compel arbitration of non-signatories to an agreement may invite some creative application of the applicable theories described above, a belt-and-suspenders approach in drafting a dispute resolution clause may provide more options to the party attempting to compel arbitration. Here, the appellate court appeared wary of applying a purchase agreement’s arbitration provision to a homeowner who was two-times removed from the original purchase agreement transaction. However, the court noted that three of the potential theories to enforce the arbitration clause were inapplicable based on how the agreement was structured.

Massachusetts Clarifies When the Statute of Repose is Triggered For a Multi-Phase or Multi-Building Project

Jeffrey J. Vita and Anna M. Perry | SDV Insights

Lennar Hingham Holdings, LLC (“Lennar”) built a twenty-eight-building, 150-unit condominium project containing twenty-four discrete phases over a seven-year span. The condominium association subsequently brought an action against Lennar and others alleging design and construction defects to four main components of the common elements: “decks and columns,” “roofing/flashing,” “exterior walls/flashing/building envelope,” and “irrigation system.” In response, the defendants argued that the plaintiff’s claims with respect to six of the twenty- eight buildings were barred by Massachusetts’s six-year statute of repose, G. L. c. 206 § 2B.

The United States District Court for the District of Massachusetts previously held that all twenty-eight of the condominium’s buildings should be treated as a single improvement for purposes of application of the statute of repose. Subsequently, the court certified the following question to the Massachusetts Supreme Judicial Court: Where the factual record supports the conclusion that a builder or developer was engaged in the continuous construction of a single condominium development comprising multiple buildings or phases, when does the six-year period for an action of tort relating to the construction of the condominium’s common or limited common elements start running?

The plaintiff association argued that the meaning of the term “improvement,” as used in the statute, was crucial to determining when the six-year statute of repose is triggered. Plaintiff claimed the entire condominium project was a single “improvement” based on factors such as the terms of the master deed, which created a single legal entity, the pace and continuity of the construction, and the fact that the defendants were involved in the project from beginning to end. Thus, adopting the plaintiff’s view, the entire project would be considered a single “improvement” as opposed to 28 separate improvements. Opposing this argument, the defendants argued that the statute of repose was triggered as each building in the project was opened for use based on the various certificates of occupancy issued by the town.

The Massachusetts Supreme Court disagreed with the plaintiff’s arguments and found each building constituted a separate improvement for purposes of the statute of repose. As each building was issued its certificate of occupancy, the Court found “improvement” to mean each individual building. Additionally, the Court found that “where a particular improvement is integral to and intended to serve multiple buildings within a single phase, or buildings across multiple phases, or even the condominium development as a whole, the statute of repose begins to run when that discrete improvement is substantially complete and open to its intended use.” The Court reasoned that the legislature’s intent, when enacting the statute, was to strike a reasonable balance between the right to a remedy for owners such as the plaintiff and the need to have an outer limit on the tort liability of those involved in the construction process.

This case is a win for contractors, owners, developers, and architects as their potential liability is further limited under Massachusetts’s statute of repose for multi-phase or multi-building projects. Despite this ruling, contractors of all tiers will still want to ensure they have adequate insurance coverage during the entirety of the applicable statute of repose period for any and all work they complete. As a result, it is critical to review your products-completed operations coverage within your commercial general liability policy to ensure it will cover you for the entirety of the statute of repose applicable in the jurisdiction in which you perform the construction activities.

Deadlines. . . They’re Important. Project Owner Risks Losing Claim By Failing to Timely Identify “Doe” Defendant

Garret Murai | California Construction Law Blog

Earlier this year I filed a complaint in a court which I won’t identify other than to say that it wasn’t the San Francisco Superior Court. Immediately upon filing the complaint the Court gave notice of a trial date. As counsel for the party bringing the action, I appreciate this, as it eliminates the back and forth jostling that can sometimes occur when trying to get a trial date.

Here’s the kicker though. While I appreciate getting a trial date straight out of the gate. The date I got was . . . wait for it . . . not until 2022!

Those who litigate in California state courts know that the courts are understaffed and overworked. But you’ve got to give this un-named court credit for being upfront. Forget the “well, let’s see where this goes” niceties. Trial within a year? Fugetaboutit. Trial within a year and a half. Don’t even think about it. Trial within two years. It’s about as good as you’re going to get.

But it’s not just the courts who have had pre-pandemic issues only get worse since COVID. Everyone these days seem to be running slower in a COVID-induced brain fog. Seriously, it’s a thing. And not just among the Australians. The Irish are apparently feeling it too. And I have a sneaking suspicion so too are we Americans.

With Thanksgiving reduced to your eating a microwaved turkey dinner in front of your television set and Christmas and New Year looking less like reality and more like sugar plums dancing in your head, focused and diligent, should you remain, particularly if you’re litigating this holiday season or any season for that matter.

In the next case, Steciw v. Petra Geosciences, Inc., Case No. G057375 (July 29, 2020), 4th District Court of Appeal, homeowners in a construction defect case nearly lost their right to sue a geotechnical engineer in a claim brought under the Right to Repair Act by failing to serve the engineer within three years after naming the engineer as a defendant.

The Steciw Case 

On July 2, 2014, homeowners Eugene Steciw and others sued Shappell Industries and Toll Brothers, Inc. for construction defects arising out of the construction of their homes in a single-family housing development known as San Joaquin Hills in Laguna Niguel, California. In addition to naming Shappell and Toll Brothers as defendants the complaint also named unidentified defendants, including unnamed engineers, as “Doe Defendants.”

In October 2014, Toll Brothers filed a cross-complaint against various subcontractors but not against Petra Geosciences the geotechnical engineer on the project. Two months later, in December 2014, Toll Brothers filed a motion to dismiss the complaint or, in the alternative, stay the action to comply with the pre-litigation procedures of the Right to Repair Act.

On May 25, 2015, the Court granted Toll Brothers’ motion and stayed the action pending compliance with the pre-litigation procedures under the Right to Repair Act. Nine months later, on February 19, 2016, the Court ended the stay concluding that Toll Brothers “had its opportunity to inspect and repair the defects noticed by Plaintiffs, but has chosen not to.”

On August 2, 2017, the homeowners amended their complaint to name Petra Geosciences as “Doe 101.” According to the homeowners, they did not become aware that Petra Geosciences was a potentially responsible party until April 13, 2017 when Toll Brothers produced discovery identifying Petra Geosciences as the geotechnical engineer. The homeowners served Petra Geosciences on August 9, 2017, three years and 38 days after the original complaint was filed.

Petra Geosciences answered the homeowner’s amended complaint on September 7, 2017. Nine months later, on June 19, 2018, Petra Geosciences filed a motion to dismiss claiming that by serving Petra Geosciences three years and 38 days after the original complaint was filed, the homeowners failed to comply with Code of Civil Procedure section 583.210 which provides that a “summons and complaint shall be served upon a defendant within three years after the action is commenced against the defendant.”

What happened next was interesting and even a bit eyebrow raising:

  • On July 10, 2018, two weeks before the scheduled hearing on Petra Geosciences motion to dismiss, the parties were in court on unrelated matters when the trial court decided sua sponte (Latin for “on its own motion”) to advance the hearing on the motion to dismiss, and announced its intention to grant the motion.
  • In response to comments made by the homeowners’ counsel that the hearing was not scheduled until two weeks later, the trial court responded, “I was told they are advanced to today, and whether you like it or not, I’m going to deal with them, and you can figure out what you’re going to with it.” According to the trial court, the case had “spun wildly out of control.” When asked by the homeowners’ counsel whether they could file their opposition that day, the trial court responded, “[t]he way it works is, file when you can. I’m not going to turn it down. I start reading. And when I get bored, stop reading. Put the good stuff up front.”
  • At the conclusion of the hearing, the trial court stated, “[a]t this point, it will all be under submission. I have to go back and review this. And don’t be surprised if you there’s not much changed between what the minute order will say and what I already said, but if get open — that’s why you’re here. You’re here to get me to think about it.”
  • Later that day, the homeowners’ counsel filed a 101-page opposition including exhibits.  However, the trial court’s minute order, which was entered the following day on July 11, 2018, rather than stating that the court had taken the matter under submission as the court said that it would, stated that it was the trial court’s decision to grant Petra Geoscience’s motion to dismiss.
  • After the trial court’s minute order was entered, the homeowners’ counsel filed a motion for reconsider on the ground that the trial court had not considered its 101-page opposition. The Court denied the motion for reconsideration without explanation and later entered a judgment of dismissal in favor of Petra.

Counsel for the homeowners appealed.

The Appeal

On appeal, the 4th District Court of Appeal noted that under Code of Civil Procedure section 583.210 even defendants identified as “Doe” defendants must be served within three years after an action is originally filed.

However, explained the Court of Appeal, the three year deadline is tolled under certain circumstances under Code of Civil Procedure section 583.240:

In computing the time within which service must be made pursuant to this article, there shall be excluded the time during which any of the following conditions existed:

(a) The defendant was not amenable to the process of the court.

(b) The prosecution of the action or proceedings in the action was stayed and the stay affected service.

(c) The validity of service was the subject of litigation by the parties.

(d) Service, for any other reason, was impossible, impracticable, or futile due to causes beyond the plaintiff’s control. Failure to discover relevant facts or evidence is not a cause beyond the plaintiff’s control for the purpose of this subdivision.

Under Code of Civil Procedure section 583.240, explained the Court of Appeal, “[i]t is self-evident that a party must be identified before it can be served”,  that “[i]n many cases, formal discovery is the only reasonable means of identifying a party,” and that “[i]n such cases, if a stay prevents discovery, it also, as a practical matter, impedes (affects) service.”

However, the Court of Appeal was careful to make two points with respect to subdivision (b) of Code of Civil Procedure section 583.240.

First, explained the Court of Appeal, tolling is appropriate where discovery is “reasonably necessary” in order to determine the identity of a “Doe” defendant. This does not mean that discovery is “essential” in determining the identify of a “Doe” defendant. The Court of Appeal gave the following example:

For example, suppose plaintiffs could have identified Petra by reviewing documents in the building inspector’s office, but Petra was only identified in an obscure footnote. We would not necessarily expect plaintiffs to find that information as a matter of course, and thus formal discovery would be reasonably necessary to identify Petra, even though it may have been technically possible to do so without discovery. A plaintiff need not go to extraordinary lengths.

Second, explained the Court of Appeal, if a stay did not prohibit service, and if the homeowners had a practical means of identifying Petra Geosciences as a “Doe” defendant without formal discovery, then no tolling would apply.

Thus, explained the Court:

[T]he proper focus here is on whether the stay affected service as a practical matter by depriving plaintiffs of the only reasonable means of identifying Petra. If plaintiffs did have other reasonable means of identifying Petra, then, because the stay itself did not directly prohibit service, the stay did not affect service. It is, after all, still a plaintiff’s burden to serve all parties within three years of filing the complaint. And if there were practical and reasonably discoverable means of doing so without formal discovery, then the stay did not impede service and the tolling provision does not apply.

However, the Court of Appeal remanded the case back to the trial court, holding that whether the trial court’s stay of the action practically impeded the homeowners from identifying Petra Geosciences as a “Doe” defendants was a decision for the trial court to make.

Conclusion

So, there you have it. In multi-party construction litigation cases, as most typically are, you need to name your “Doe” defendants within three years of filing your complaint, or be able to show that that you had practical ability to determine the identity of a “Doe” defendant within those three years.

Contractor Haunted by “Demonized” Flooring

Garret Murai | California Construction Law Blog

The most un-Halloween of Halloweens has come and gone. If you ask me though, between COVID, protests, fires, hurricanes, the passing of a Supreme Court Justice, and one of the most hotly contested elections in U.S. history, we’ve had enough scares this year to make up for it and then some.

In the next case, Sieg v. Registrar of Contractors, Case No. A156089 (September 28, 2020), 1st District Court of Appeal, one contractor, haunted by “demonized” flooring, and who couldn’t catch a break even with the talisman of a release of liability signed by the homeowner, can add one more to his list of reasons why 2020 needs to be relegated to the history books.

The Sieg Case

In January 2012, homeowners Dennis and Ana Torchia purchased wood flooring for their home in Windsor, California. Specifically, they selected Brazilian Ebony, an exotic species of unusually hard wood, for its appearance and durability.

The company from whom the Torchias purchased their flooring, Lumber Liquidators, referred them  to George Sieg a sole proprietor doing business as B & G Hardwood Flooring for the installation. When the Brazilian Ebony hardwood flooring was received, Sieg and his crew delivered the flooring to the Torchias.

Following delivery, Sieg gave the Torchias a work order proposal estimating the cost of installation. Included with the work order was a document entitled “Conditions” which stated in part: “6 mil black polyethylene is recommended to cover 100% of the crawl space earth.” Sieg also gave the Torchias an installation order form which included a line stating “MOISTURE BARRIER NEEDED” and a line for the customers initials and language at the bottom of the form stating “[t]he above information has been explained to me in full by my installer, and I understand that the installer [is] not responsible for any damage caused by post-installation changes in the moisture levels.” Both documents were signed by the Torchias.

On the same day that the documents were signed, Sieg raised the need for a moisture barrier and his recommendation that installation wait a few days to allow the flooring to acclimate, but said that he would be willing to start installation immediately if the Torchias signed a disclaimer and release any claims for problems arising from the installation without a moisture barrier. The Torchias agreed and signed a disclaimer which stated that installation of the floor was inadvisable because the “Prefinished flooring [had a moisture difference of] over two points less than subfloor and no plastic covering the dirt under the house.”

Within weeks following installation of the Brazilian Ebony hardwood flooring, Torchia said that he noticed a “very loud popping sound, sounding like firecrackers going off in different parts of the house.” After the Torchias contacted Lumber Liquidators about the problem, Lumber Liquidators hired an expert, Richard King. King’s investigation revealed that, in addition to the fact that the flooring was installed without a plastic liner under circumstances in which there was a moisture differential between the hardwood floor and the subfloor,  there were issues with the workmanship, including:

  1. The flooring was installed tight against the walls with no expansion space provided;
  2. Some areas of the flooring had no fasteners;
  3. The flooring was generally fastened two to four inches from ends rather than one to three inches from ends as recommended by the manufacturer;
  4. The flooring fasteners were generally fastened eight to 11 inches apart, and in some places more than 12 inches apart, rather than six to eight inches apart as recommended by the manufacturer;
  5. Fasteners were driven through the subfloor;
  6. No underlayment was installed around registers and crawl space access.

According to testimony by King, “when you walk on the floor and it’s not fastened properly, the floor moves, buckles, wiggles, makes noises. But with Mr. Torchia’s floor . . . I could look into the alcove with nobody in there. And the floor continues to pop and make noises. It was like it was demonized.”

The Torchias later had a moisture barrier installed in the crawl space but the demon popping continued.

The CSLB Complaint, ALJ Hearing, and Writ of Administrative Mandamus

Ultimately, the Torchias filed a complaint with the Contractors State License Board. Following investigation, the CSLB filed an Accusation against Sieg seeking revocation or suspension of Sieg’s contractor’s license and restitution.

A hearing was held over the course of two days before an Administrative Law Judge (“ALJ”) and, due to the illness of Sieg’s counsel, closing arguments were submitted in writing by both parties. The ALJ later issued a proposed decision recommending a 65-day suspension, a three-year probationary period, and restitution in the amount of $27,884.21.

One interesting note for those who have not been involved in CSLB administrative hearings is that decisions by ALJ judges are only recommendations and the CSLB can choose to adopt, reject, or modify any decisions by an ALJ. This is exactly what happened here. The Registrar of the CSLB adopted the ALJ’s proposed decision, but instead adopting the 65-day suspension recommended by the ALJ, recommended that Sieg obtained a disciplinary bond in the amount of $30,000.

Following the decision, Sieg filed a writ of administrative mandamus with the Superior Court in accordance with Code of Civil Procedure section 1094.5. The Superior Court, after hearing oral argument by the parties, issued an order denying writ relief. Sieg, in turn, appealed again to 1st District Court of Appeal.

The Appeal

On appeal, the 1st District Court of Appeal noted the appropriate standard of review by courts when reviewing appeals from administrative decisions. Superior Courts, explained the Court of Appeal, when considering a writ of administrative mandamus, apply what is known as the “Independent Judgment Test,” and will affirm an agency’s finding of fact if they are supported by the weight of the evidence, but reviews questions of law de novo (i.e., without weight being giving to one part or another) giving respectful consideration to an agency’s decision on legal questions to the extent its reasoning is persuasive.

Further, explained the Court of Appeal, under the Independent Judgment Test the findings of an agency come “with a strong presumption of their correctness, and the burden rests on the complaining party to convince the court that the board’s decision is contrary to the weight of the evidence.”

However, explained the Court of Appeal, when reviewing a Superior Court’s decision on a writ of administrative mandamus, the Courts of Appeal review the Superior Court’s decision for substantial evidence but review questions of law de novo. Further, explained the Court of Appeal, on appeal before the Courts of Appeal, the burden is on losing party bringing the appeal.

I won’t go into all of the details of the appeal, but suffice to say that Court of Appeal upheld the Superior Court’s denial of the writ of the administrative mandate. More pertinent to contractors and their attorneys is one already well-established rule and another one that is new to me.

First, as to the well-established rule, the CSLB found that Sieg had violated Business and Professions Code section 7109 which provides:

(a) A willful departure in any material respect from accepted trade standards for good and workmanlike construction constitutes a cause for disciplinary action, unless the departure was in accordance with plans and specifications prepared by or under the direct supervision of an architect.

(b) A willful departure from or disregard of plans or specifications in any material respect, which is prejudicial to another, without the consent of the owner or his or her duly authorized representative and without the consent of the person entitled to have the particular construction project or operation completed in accordance with such plans or specifications, constitutes a cause for disciplinary action.

On appeal, Sieg argued that he could not be found to have violated Business and Professions Code section 7109 because did not “willful[ly]” depart from accepted trade standards since he did not intend for the floors to be possessed by demonic popping sounds. The Court of Appeal made short work of this argument explaining that well-established case makes clear that “7109’s willful requirement is satisfied by evidence fo a general intent to act:

In civil cases, the word “willful,” as ordinarily used in courts of law, does not necessarily imply anything blamable, or any malice or wrong toward the other party, or perverseness or moral delinquency, but merely that the thing done or omitted to be done was done or omitted intentionally. It amounts to nothing more than this: That the person knows what he is doing, intends to do what he is doing, and is a free agent.

In short, Sieg did not have to intend that something bad were to occur in order to be found to have engaged in a “willful” departure of accepted trade standards under Business and Professions Code section 7109.

Second, is the one that is new to me. On appeal, Sieg argued that by signing the disclaimer in which the Torchias released any claims against Sieg for problems arising from the installation of the flooring without a moisture barrier, a decision should have been in his favor “by simply enforcing the Disclaimer according to its plain terms.” The Court of Appeal disagreed on the ground that, while the disclaimer might be pertinent in a private action between Sieg and Torchia, the Accusation against Sieg was brought by the CSLB even though it may have been initiated by the CSLB complaint filed by the Torchias. Further, explained the Court, in disciplinary enforcement proceedings, a homeowner cannot consent to a contractor’s departure from accepted trade standards:

Because this is not a private action between Sieg and Torchia, we see no need to address matters of unconscionability or contract illegality. Whether the Disclaimer was valid and enforceable as a contract is beside the point, since we are dealing with a disciplinary enforcement proceeding brought by CSLB on behalf of the public. For purposes of licensing enforcement, a homeowner cannot consent to a contractor’s departure from accepted trade standards for good and workmanlike construction. (Civ. Code § 3513 [a law established for a public reason cannot be contravened by a private agreement].)

Whatever private arrangements may be made between a contractor and a client, the contractor has an independent obligation to the public to adhere to statutorily established standards of performance. (§ 7109, subd. (a); cf. Mickelson, supra, 95 Cal.App.3d at p. 635 [rejecting concrete contractor’s attempt to defeat willfulness finding in section 7109 enforcement proceeding on the ground that “he informed both [clients] that a pour over was an improper method of repair, that he read [to the clients] the contents of the contract absolving himself of responsibility before proceeding with the pour over”].) We base this reading of section 7109, subdivision (a), on the text and legislative history of the statute. As the CSLB correctly points out, the Legislature amended section 7109, subdivision (a), in 1988, to remove language which once made it possible for contractors facing discipline to defend accusations of departure from statutory trade standards by arguing client consent. (§ 7109, as amended by Stats. 1988, ch. 1619, § 4.) Thus, while the governing contract here established the benchmark for Sieg’s obligations to Torchia, in discharging those obligations he was bound to adhere to statutorily imposed standards of workmanship that could not be diluted, circumvented, or released away by private consent.

Conclusion

The CSLB can take enforcement action based on any one of numerous violations set forth under the Business and Professions Code. Where those statutory sections involve a “willful departure” or “willful or deliberate” act, the term “willful” simply means an intentional act not an intent that something bad will occur. Sieg also highlights that releases and disclaimers between a contractor and a consumer will not protect a contractor in a CSLB enforcement actions against the contractor.