ACQUA VISTA HOMEOWNERS ASSOCIATION, Plaintiff and Respondent, v. MWI, INC., Defendant and Appellant.
No. D068406
Fourth Dist., Div. One.
Jan. 26, 2017.
7 Cal. App. 5th 1129
Horvitz & Levy, H. Thomas Watson, Daniel J. Gonzalez; White, Oliver & Amundson, White, Amundson, Kish & Sweeney, Daniel M. White, Steven G. Amundson and Heather N. Catron for Defendant and Appellant.
Morris, Sullivan & Lemkul, Shawn D. Morris, Matthew J. Yarling; Peters & Freedman, David M. Peters and Kyle E. Lakin for Plaintiff and Respondent.
AARON, J.—
I.
INTRODUCTION
Our conclusion is supported by the text, structure, and legislative history of the Act, as well as this court‘s prior interpretation of section 936 in Greystone Homes, Inc. v. Midtec, Inc. (2008) 168 Cal.App.4th 1194 [86 Cal.Rptr.3d 196] (Greystone). In Greystone, this court stated that “a product manufacturer is liable [under section 936] only where its ‘negligent act or omission or a breach of contract’ . . . caused a violation of the Act‘s standards.” (Id. at p. 1216, italics omitted, quoting
In this case, Acqua Vista Homeowners Association (the HOA) sued MWI, Inc. (MWI), a supplier of pipe used in the construction of the Acqua Vista condominium development. The operative third amended complaint contained a claim for a violation of the Act‘s standards in which the HOA alleged that “[d]efective cast iron pipe manufactured in China [was] used throughout the building.” At a pretrial hearing, the HOA explained that it was not pursuing a claim premised on the doctrine of strict liability3 and that it was alleging a single cause of action against MWI for violations of the Act‘s standards.
On appeal, MWI claims that the trial court misinterpreted the Act and, as a result, erred in denying its motion for a directed verdict and motion for JNOV. We agree. The first sentence of section 936 contains an “explicit adoption of a negligence standard for claims” under the Act against material suppliers. (Greystone, supra, 168 Cal.App.4th at p. 1216, fn. 14.) While the final sentence of section 936 is not a model of textual clarity, for the reasons explained below, standard techniques of statutory interpretation make clear that this sentence merely provides that the negligence standard applicable to claims brought against material suppliers under the Act does not apply to common law claims for strict liability against such suppliers. Since it is undisputed that the HOA‘s claim was brought under the Act, it was required to prove that MWI “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 contract.” (
FACTUAL AND PROCEDURAL BACKGROUND
A. The action
The HOA filed this construction defect action in December 2009. In September 2013, the HOA filed the operative third amended complaint in which it named MWI, and others, as defendants.6 The third amended complaint alleged a cause of action styled as “Violation of SB800[7] Construction Standards,
B. The trial
The trial court held a jury trial on the HOA‘s claims under the Act against MWI, and another iron pipe supplier, Standard Plumbing & Industrial Supply Co. (Standard). At trial, the HOA presented evidence that the pipes supplied by MWI contained manufacturing defects, that they leaked, and that the leaks had caused damage to various parts of the condominium development.
MWI moved for a directed verdict on the ground that the HOA had failed to present evidence that MWI caused a violation of the Act‘s standards as a result of MWI‘s negligence or breach of contract. In addition, MWI requested that the trial court instruct the jury that the HOA was required to present such evidence. The trial court denied MWI‘s motion for a directed verdict and MWI‘s jury instruction requests.
C. The jury‘s verdict
The jury rendered a special verdict that responded to four questions. The first question asked the jury, “Have the cast iron pipes supplied by the Defendants at Acqua Vista leaked?” The jury responded in the affirmative with respect to both MWI and Standard. The second question asked the jury,
D. The judgment
The trial court entered a judgment against MWI in March 2015 in the amount of $23,955,796.28, reflecting MWI‘s 92 percent responsibility for the total damages suffered.11
E. Postjudgment motions
MWI moved for JNOV on several grounds, including that the HOA had failed to present evidence that MWI had caused a violation of the Act‘s standards as a result of MWI‘s negligence or breach of contract. The trial court denied the HOA‘s motion for JNOV, reasoning in part: “MWI argues that judgment should be entered in favor of MWI because Plaintiff failed to prove a prima facie case for liability under . . . § 896. Specifically, MWI argues Plaintiff‘s [sic] must prove negligence and causation and that Plaintiff failed to do so. As this court previously ruled, the last sentence of . . . § 936 [‘[h]owever, the negligence standard in this section does not apply to any general contractor, subcontractor, material supplier, individual product manufacturer, or design professional with respect to claims for which strict liability would apply‘] removes any negligence/causation requirement in a . . . § 896 action against certain defendants, including MWI, a material supplier in this case. The court is not persuaded by MWI‘s reliance on Greystone[, supra,] 168
MWI also filed a motion for new trial on numerous grounds, including that the trial court had failed to instruct the jury on negligence and causation with respect to the HOA‘s claim under the Act and that the special verdict form had not required any findings on these issues. The trial court employed similar reasoning in denying MWI‘s motion for new trial as it had used in denying MWI‘s motion for JNOV.
F. The amended judgment and appeals
MWI filed an appeal from the judgment and the order denying the motion for JNOV. The trial court entered an amended judgment in the amount of $23,955,796.28 against MWI in July 2015.12 MWI filed a second notice of appeal from the original and amended judgments and the order denying the motion for JNOV.13
III.
DISCUSSION
The trial court erred in denying MWI‘s motion for a directed verdict and motion for JNOV
MWI claims that the trial court erred in denying its motions for a directed verdict and for JNOV because there is no evidence in the record that MWI “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 contract” (
” ‘[T]he power of the court to direct a verdict is absolutely the same as the power of the court to grant a nonsuit.’ [Citation.] ‘A motion for a directed verdict “is in the nature of a demurrer to the evidence, and is governed by practically the same rules, and concedes as true the evidence on behalf of the adverse party, with all fair and reasonable inferences to be deduced therefrom.“’ ” (Baker v. American Horticulture Supply, Inc. (2010) 186 Cal.App.4th 1059, 1072 [111 Cal.Rptr.3d 695].) ” ‘“A defendant is entitled to a nonsuit [or directed verdict] if the trial court determines that, as a matter of law, the evidence presented by plaintiff is insufficient to permit a jury to find in his favor.” ’ ” (Ibid.) A trial court must grant a motion for JNOV whenever a motion for a directed verdict for the aggrieved party should have been granted. (
In reviewing a trial court‘s ruling on a motion for a directed verdict, “the reviewing court must resolve every conflict in the testimony in favor of the plaintiff and at the same time indulge in every presumption and inference that could reasonably support the plaintiff‘s case.” (County of Kern v. Sparks (2007) 149 Cal.App.4th 11, 16 [56 Cal.Rptr.3d 551].) Similarly, when reviewing an order on a motion for JNOV, “an appellate court will use the same standard the trial court uses in ruling on the motion, by determining whether it appears from the record, viewed most favorably to the party securing the verdict, that any substantial evidence supports the verdict. ’ ” ‘If there is any substantial evidence, or reasonable inferences to be drawn therefrom in support of the verdict, the motion should be denied.’ ” ’ ” (Trujillo v. North County Transit Dist. (1998) 63 Cal.App.4th 280, 284 [73 Cal.Rptr.2d 596] (Trujillo).)
The proper interpretation of the Act and whether there is substantial evidence to support the HOA‘s claim under the Act present questions of law that we review de novo. (See, e.g., Yohner v. California Dept. of Justice (2015) 237 Cal.App.4th 1, 7 [187 Cal.Rptr.3d 550] (Yohner) [“Yohner‘s claim raises an issue of statutory interpretation, and we therefore apply the de novo standard of review“]; Sweatman v. Department of Veterans Affairs (2001) 25 Cal.4th 62, 68 [104 Cal.Rptr.2d 602, 18 P.3d 29] [stating that where an appeal from the denial of a motion for JNOV raises a legal issue, an appellate court reviews the question de novo].)
1. Principles of statutory interpretation
In Yohner, supra, 237 Cal.App.4th at pages 7–8, this court restated the following well-established rules of statutory interpretation:
” ‘In construing any statute, “[w]ell-established rules of statutory construction require us to ascertain the intent of the enacting legislative body so that we may adopt the construction that best effectuates the purpose of the law.” [Citation.] “We first examine the words themselves because the statutory language is generally the most reliable indicator of legislative intent. [Citation.] The words of the statute should be given their ordinary and usual meaning and should be construed in their statutory context.” [Citation.] If the statutory language is unambiguous, “we presume the Legislature meant what it said, and the plain meaning of the statute governs.” [Citation.]’ [Citation.]”
” ‘If, however, the statutory language is ambiguous or reasonably susceptible to more than one interpretation, we will “examine the context in which the language appears, adopting the construction that best harmonizes the statute internally and with related statutes,” and we can “look to a variety of extrinsic aids, including the ostensible objects to be achieved, the evils to be remedied, the legislative history, public policy, contemporaneous administrative construction, and the statutory scheme of which the statute is a part.” [Citation.]’ [Citation.]”
” ’ “We must select the construction that comports most closely with the apparent intent of the Legislature, with a view to promoting rather than defeating the general purpose of the statute, and avoid an interpretation that would lead to absurd consequences.” ’ ”
2. The Act
Section 896 provides a list of standards pertaining to residential construction, including that “[t]he lines and components of the plumbing system, sewer system, and utility systems shall not leak” (
Chapter 4 of the Act, beginning with section 910, establishes a series of prelitigation procedures that a claimant must pursue prior to filing an action against “any party alleged to have contributed to a violation of the standards.” (
3. The text and structure of the Act supports the conclusion that a homeowner/claimant suing a material supplier for violating a standard under the Act must prove that the material supplier “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 contract” (§ 936 )
The first sentence of section 936, when read in context with section 896, clearly and unambiguously states that a homeowner/claimant (such as the HOA) suing a material supplier (such as MWI) for violating a standard under the Act must prove that the material supplier caused, in whole or in part, a violation of a standard as the result of a negligent act or omission or a breach of contract. (See
Thus, unless the HOA is correct that the final sentence of section 936 qualifies the standard of liability expressly stated in the first sentence of
a. The final sentence of section 936 is most reasonably interpreted as providing that the negligence standard adopted in section 936 does not apply to common law claims for strict liability
We acknowledge that the plain language of the final sentence in section 936, when read in isolation, is ambiguous. (See
To begin with, interpreting the final sentence of section 936 as making clear that the negligence standard applicable to claims under the Act does not apply to common law claims is a plausible textual interpretation of the statute. Strict liability is a common law doctrine (see generally Jimenez v. Superior Court (2002) 29 Cal.4th 473, 484 [127 Cal.Rptr.2d 614, 58 P.3d 450] (Jimenez) [outlining the evolution of the doctrine]), and the sentence may reasonably be read as stating that the “negligence standard” contained in section 936 does not apply if the common law doctrine of strict liability “would apply,” (
Our interpretation of the final sentence of section 936 is also strongly supported by the similarity of that sentence to other provisions in the Act that clearly reflect the Legislature‘s intent to limit the Act‘s effect on the common
Further, this interpretation is consistent with the basic structure of the statute. (See Yohner, supra, 237 Cal.App.4th at p. 8 [in interpreting an ambiguous statute courts may ” ’ “examine the context in which the language appears” ’ “].) Section 896, a provision outside of chapter 4 of the statute, clearly sets forth a standard of liability applicable to builders. Section 896 also states that nonbuilders will be liable to the “extent set forth in Chapter 4.” The first sentence of section 936, a provision in chapter 4, sets forth a clear standard of liability applicable to a series of nonbuilder entities. Interpreting the final sentence of section 936 as providing that the negligence standard applicable to statutory claims against nonbuilders under the Act does not apply to certain common law claims (i.e., those “claims for which strict liability would apply” (
b. The HOA‘s criticisms of this interpretation of the Act are unpersuasive
The HOA contends that this interpretation of the Act, which MWI urged in the trial court, is flawed for several reasons. However, none of the
The HOA also maintains that interpreting “the last sentence of section 936 as referring to common law claims outside of [the Act] is . . . inconsistent with the rest of the . . . statute, in that no other provisions comment on the preservation of common law construction defect claims.” (Italics added.) We disagree. As discussed above, the Act repeatedly refers to the preservation of common law construction defect claims. (See
Citing sections 896 and 943, the HOA also argues that “a construction of section 936 as referring to common law strict liability claims outside of [the Act] makes no sense because under the clear language of the statute, such construction defect claims do not exist outside of [the Act].” (Italics added.) We disagree, for the following reasons.
Section 896 provides in relevant part that a “claimant‘s claims or causes of action shall be limited to violation of . . . the following standards . . . except as specifically set forth in this title.” (Italics added.) Section 943, subdivision (a) provides, ”[e]xcept 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.” (Italics added.) The HOA notes that the California Supreme Court is currently considering whether, in light of sections 896 and 943, the Act provides the exclusive remedy for ”construction defect claims that are actionable under [the Act].” (Italics added.) (See McMillin Albany LLC v. Superior Court (2015) 239 Cal.App.4th 1132 [192 Cal.Rptr.3d 53], review granted Nov. 24, 2015, S229762 (McMillin).) The HOA argues that in deciding McMillin, the Supreme Court is likely to disapprove Liberty Mutual Ins. Co. v. Brookfield Crystal Cove LLC (2013) 219 Cal.App.4th 98, 102 [163 Cal.Rptr.3d 600] (Liberty Mutual), in which the Court of Appeal held that, notwithstanding sections 896 and 943, the Act “does not eliminate a property owner‘s common law rights and remedies, otherwise recognized by law, where . . . actual damage has occurred.“19 (Liberty Mutual, at p. 101; but see Elliott Homes, Inc. v. Superior Court (2016) 6 Cal.App.5th 333, 345 [210 Cal.Rptr.3d 889] (Elliott) [disagreeing with Liberty Mutual and stating, “The Act does not specifically except actions arising from actual damages“].)
Even assuming, strictly for the sake of argument, that the HOA is correct that the Act provides the exclusive remedy for construction defect claims that are actionable under the Act,20 that would not mean that “strict liability
In light of these provisions, it is clear that construction defect claims exist outside of the Act. For example, it is clear that the Act does not preclude common law strict liability construction defect claims based on products that cause personal injury. (
c. The HOA‘s interpretation of the final sentence of section 936 is not supported by the text or structure of the Act
The HOA argues that in interpreting the last sentence of section 936, this court need not “look past the plain language of section 936,” and offers the following interpretation of section 936: “A negligence standard applies to non-builders, according to the first sentence; however[,] that negligence standard does not apply to nonbuilders ‘with respect to claims for which strict liability would apply,’ [§ 936] according to the last sentence. The sentence simply means what it says. If the claim is one to which strict liability would
We are not persuaded by the HOA‘s “plain language” argument. To begin with, the plain language of the last sentence of section 936 states only that the ”negligence standard in this section does not apply.” (Italics added.) The last sentence does not state that the causation or breach of contract provisions in the first sentence of section 936 do not apply. Thus, if the HOA‘s argument that the final sentence of section 936 qualifies the standard of liability to be applied to claims brought against nonbuilders pursuant to the Act were correct, applying the plain language of the final sentence of section 936 would not, as the HOA suggests, mean that a material supplier‘s liability would be ” ‘on par’ ” with a builder‘s liability under section 896.
Rather, since the last sentence of section 936 states that the ”negligence standard in this section does not apply” (
We can conceive of no public policy reason why the Legislature would have intended that the statute be interpreted in such a fashion. More specifically, it would be absurd to think that the Legislature intended that claims that would have been strict liability tort claims at common law be actionable under the Act only if caused by a breach of contract.23 Thus, we are unpersuaded by the HOA‘s argument that the “plain language” of the final sentence of section 936 demonstrates that the final sentence of section 936 qualifies the standard of liability outlined in the first. (See John v. Superior Court (2016) 63 Cal.4th 91, 96 [201 Cal.Rptr.3d 459, 369 P.3d 238] [statutes are to be interpreted so as to avoid absurd results].)
In the trial court, the HOA argued that the phrase ” ‘negligence standard in this section’ ” (italics added) in the last sentence of section 936 “is referring to the entire additional negligence/breach of contract requirement, discussed
In addition, to interpret the statute in the manner that the HOA suggests would mean that the standard of liability for a claim brought pursuant to the Act would be determined by the standard of liability that would have applied if the claim had been brought at common law. Or, as the HOA argues in its brief, “[The Legislature] wrote that the negligence standard does not apply to ‘claims for which strict liability would apply’ meaning SB800 claims to which strict liability ‘would apply’ outside of SB800.” (Quoting
For example, the HOA asserts in its brief that all common law claims based on a defendant‘s supply of a defective product are based on strict liability.24 However, that is not the case. A claim based on a defective product may be brought at common law under either a negligence theory or a strict liability theory. (See, e.g., Johnson v. United States Steel Corp. (2015) 240 Cal.App.4th 22, 30-31 [192 Cal.Rptr.3d 158] [” ’ “Products liability is the name currently given to the area of the law involving the liability of those who supply goods or products for the use of others to purchasers, users, and bystanders for losses of various kinds resulting from so-called defects in those products.“’ [Citation.] One may seek recovery in a products liability case on theories of both negligence and strict liability” (italics added)]; Brady v. Calsol, Inc. (2015) 241 Cal.App.4th 1212, 1218 [194 Cal.Rptr.3d 243] [“A products liability case may rest on either a theory of strict liability or negligence. . . . In asserting a claim for negligence, the plaintiff must prove the defect in the product was due to the defendant‘s negligence” (citation omitted)].) Thus, determining whether a claim brought under the Act would
In addition, while the HOA argues that the Act should be interpreted to provide that a claim pursuant to the Act against a material supplier premised on a defective product should be governed by the same standard of liability as applies to a builder under section 896, a common law claim for strict products liability has elements not present in a statutory claim under section 896, namely, a defective product and resulting damage other than economic loss.25 (See Jimenez, supra, 29 Cal.4th at p. 484.) The HOA fails to explain why the Legislature would have wanted to subject material suppliers to statutory liability without requiring proof of these elements merely because a plaintiff could allege a common law strict liability claim against the supplier. Moreover, this case shows the difficulties of applying such an interpretation of the Act in determining the standard of proof to be applied at trial to a party‘s claims. As noted in part I., ante, the HOA abandoned its strict liability claim on the eve of trial. Under these circumstances, it is far from clear that the HOA‘s statutory claim under the Act can be fairly characterized as being a claim “for which strict liability would apply” (
d. The legislative history
The Act‘s legislative history fully supports our interpretation of the Act. Section 936 was initially adopted as part of the original enactment of the Act through Senate Bill No. 800 in 2002. The first sentence of section 936 in the original enactment is identical in all material respects to the current version of the statute. (See Stats. 2002, ch. 722, § 3, p. 4249; former § 936 [“Each and every provision of the other chapters of this title apply to subcontractors, material suppliers, individual product manufacturers, and design professionals to the extent that the subcontractors, material suppliers, individual product manufacturers, and design professionals 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 contract“].) However, as initially adopted in 2002, the final sentence of former section 936 stated, “However, this section does not apply to any subcontractor, material supplier, individual product manufacturer, or
Although, as both MWI and the HOA agree, the plain language of the final sentence of former section 936 as originally adopted could be read, as the HOA states, to “completely exempt[] nonbuilders [such as material suppliers] from section 936 . . . whenever strict liability would apply,”26 the legislative history of Senate Bill No. 800 supports the conclusion that the Legislature intended for the standard of liability specified in the first sentence of section 936 to apply to claims brought pursuant to the Act against nonbuilders such as material suppliers. (See, e.g., Sen. Com. on Judiciary, Rep. on Sen. Bill No. 800 (2001-2002 Reg. Sess.) as amended Aug. 28, 2002, p. 5 [“the standards are intended to apply to . . . material suppliers . . . to the extent that they cause, in whole or in part, a violation of a particular standard as a result of their negligent acts or omissions, or breach of contract“].) In contrast, we have located nothing in the legislative history that would support the conclusion that the Legislature intended to entirely exempt material suppliers, or any other nonbuilders, from statutory liability under section 936 whenever “strict liability would apply.” (
In 2003, the Legislature amended the final sentence of section 936 to its present form. (Stats. 2003, ch. 762, § 5, p. 5732.) The statute amended the last sentence of section 936 in relevant part as follows, “However, the negligence standard in this section does not apply to any . . . material supplier . . . [to] with respect to claims for which strict liability would apply.” (Stats. 2003, ch. 762, § 5, p. 5732 [showing additions to the statute in italics and deletions in strike-through].) Numerous legislative committee reports support the conclusion that the Legislature viewed the 2003 amendments to the Act as “technical cleanup” of the original statute adopting the Act the previous year. (Sen. Rules Com., Off. of Sen. Floor Analyses, 3d reading analysis of Assem. Bill No. 903 (2003-2004 Reg. Sess.) as amended Sep. 4, 2003, p. 1.)
To begin with, the HOA fails to explain why the Legislature would intend to make material suppliers liable under the Act for a violation of the Act‘s standards irrespective of whether they supplied a defective product that resulted in damage other than economic loss merely because the Jimenez court concluded that a manufacturer may be liable where these elements are proven through a common law claim (Jimenez, supra, 29 Cal.4th at p. 476). The HOA‘s interpretation of the amendments is also directly contrary to our discussion of the Act and Jimenez in Greystone. (See Greystone, supra, 168 Cal.App.4th at p. 1216, fn. 14 [“The Legislature‘s decision not to apply a strict liability standard28 to product manufacturers is consistent with the holdings [of two cases disapproved in Jimenez]. The common law has expanded the liability of product manufacturers in this regard, albeit subject to the economic loss rule, beyond that provided in section 936” (italics added)].)
Moreover, there is nothing in the legislative history of the 2003 amendments that would support the HOA‘s speculation that the Legislature intended such a significant substantive change in the Act by way of the 2003 amendments. Such a change would have been entirely incompatible with the Legislature‘s characterization of the amendments as constituting a “technical
Further, the sponsor of Assembly Bill No. 903 (2003-2004 Reg. Sess.), Assemblymember Darrell S. Steinberg, sent a letter to Governor Gray Davis urging the signing of the bill, in which he described the legislation as a “non-controversial bill” that made “various technical changes,” including “[c]larify[ing] that SB 800 did not change the law regarding strict liability.” (Italics added.) (Assemblymember Darrell S. Steinberg, letter to Governor Gray Davis, Sept. 16, 2003.)29 The Steinberg letter is entirely consistent with our interpretation of the final sentence of section 936 as evincing the Legislature‘s intent that the negligence standard specified in the first sentence of section 936 does not apply to common law strict liability claims against material suppliers. Thus, we reject the HOA‘s suggestion that the Legislature amended the Act in 2003 with the intention of “plac[ing] a [material] supplier ‘on par’ with a builder.”
e. Greystone
In light of the text, structure, and legislative history of the Act discussed above, we adhere to our conclusion in Greystone that a nonbuilder entity is liable under the Act “only where its ‘negligent act or omission or a breach of contract’ . . . caused a violation of the Act‘s standards.” (Greystone, supra, 168 Cal.App.4th at p. 1216, italics omitted.) In Greystone, in reversing a summary judgment in favor of a product manufacturer, this court considered, among other issues, whether the common law economic loss rule30 precluded a builder from seeking equitable indemnification under the Act from a jointly liable product manufacturer for the cost of repairing damage caused by the manufacturer‘s violation of the Act‘s standards. (Greystone, at pp. 1213-1220.) We explained that in determining this issue, we first were required to address whether the economic loss rule would preclude a homeowner from collecting such damages in an action against the product manufacturer, since the builder‘s ability to pursue an indemnity action against the manufacturer was contingent on the manufacturer and the builder sharing a joint legal obligation to the homeowners. (Id. at p. 1213.) After citing
The Greystone court also rejected the manufacturer‘s argument that section 936‘s reference to the preservation of “common law . . . defenses” permitted the manufacturer to defeat the builder‘s claim by assertion of the economic loss doctrine.32 (See Greystone, supra, 168 Cal.App.4th at pp. 1214-1215.) In rejecting this argument, we stated: “A more reasonable interpretation of section 936 [i.e., one that excluded the economic loss doctrine as a defense that could be asserted in an action premised on § 936] follows from the fact that, while under sections 896 and 942 a builder is strictly liable33 for any violation of the Act‘s standards, pursuant to the first sentence of section 936, a product manufacturer is liable only where its ‘negligent act or omission or a breach of contract’ . . . , caused a violation of the Act‘s standards. The reference to ‘common law and contractual defenses,’ in the second sentence of section 936 parallels the scope of duty articulated in the first sentence of the section. Thus, for example, in a suit premised on a manufacturer‘s negligent act or omission, the manufacturer may assert traditional common law defenses to negligence actions, such as comparative negligence and primary assumption of risk, to the extent that such defenses are ‘applicable’ (§ 936) to the plaintiff‘s claim.” (Greystone, supra, at pp. 1216-1217, italics added & omitted, fns. omitted.)
We also relied on the “Act‘s explicit adoption of a negligence standard for claims against product manufacturers” (Greystone, supra, 168 Cal.App.4th at p. 1216, fn. 14) in rejecting the manufacturer‘s argument that concluding that the economic loss rule did not bar the builder‘s indemnity claim “would ‘expand the law of strict product liability beyond tolerable limits’ ” (ibid.). Ultimately, “[w]e conclude[d] that the . . . Act abrogates the economic loss rule in actions brought by homeowners against individual product manufacturers for a violation of the Act‘s standards based upon the manufacturer‘s negligence or breach of contract.” (Id. at p. 1217, italics added.)
The HOA also contends that ”Greystone‘s comment on the negligence standard in section 936 is dictum, and was not integral to the decision.” “Statements by appellate courts ‘responsive to the issues raised on appeal and . . . intended to guide the parties and the trial court in resolving the matter following . . . remand’ are not dicta.” (Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1158 [163 Cal.Rptr.3d 269, 311 P.3d 184] (Sonic-Calabasas).) Our statements in Greystone on this issue were clearly responsive to the issues presented on appeal,37 and were intended to guide the proceedings on remand in light of our reversal of a summary judgment. The statements were not dicta. (See Sonic-Calabasas, at pp. 1158-1159.)
Finally, while the Greystone court quoted the entirety of section 936, including the final sentence on which the HOA bases its argument (Greystone, supra, 168 Cal.App.4th at pp. 1211-1212), the HOA is correct to note that the Greystone court did not discuss the final sentence of section 936. However, for the reasons stated above, an analysis of the final sentence, together with the remaining provisions of the Act, reinforces the correctness of our conclusion in Greystone that a nonbuilder entity is liable under the Act
C. There is no evidence in the record that MWI caused, in whole or in part, a violation of a standard in the Act as the result of its negligent act or omission or a breach of contract
In light of our interpretation of the Act provided in part III.B., ante, we must consider whether there is sufficient evidence in the record to support a verdict that MWI caused, in whole or in part, a violation of a standard in the Act as the result of its negligent act or omission or a breach of contract. (See pt. III.A., ante [outlining standard of review applicable to the review of order denying motion for a directed verdict and order denying motion for JNOV].)
We begin by observing that, until this court‘s request for supplemental briefing on this issue,38 it appeared to be undisputed that the record lacked such evidence. MWI repeatedly argued in the trial court that the Act required that the HOA prove that MWI caused, in whole or in part, a violation of a standard in the Act as the result of its negligent act or omission or a breach of contract. MWI raised this argument in a jury instruction conference, in its motion for a directed verdict, and in its motion for JNOV. In responding to MWI‘s contentions, the HOA never argued in the trial court that it had presented sufficient evidence under this interpretation of the Act. Instead, the HOA argued only that the Act did not require it to present such evidence.39 The jury was not instructed that the HOA was required to prove that MWI‘s negligence or breach of contract caused a violation of the Act‘s standards and the jury did not render any findings on these issues.
At the hearing on the motion for JNOV, MWI‘s counsel argued that in Greystone, this court outlined the applicable standard of proof and that the HOA‘s “proof failed.” MWI‘s counsel stated that there was thus no reason to revisit MWI‘s statutory interpretation argument with respect to its new trial motion. The trial court responded, “If you‘re right, the JNOV is granted and you never get to the new trial. I agree with that.”
In its opening brief in this court, after presenting its statutory interpretation argument, MWI argued that the trial court erred in denying its motion for a
However, in its supplemental brief, the HOA contends that the record does contain sufficient evidence to support the verdict. We consider each of the HOA‘s arguments pertaining to this issue.40
The HOA argues that “the record . . . supports a strong inference of a ‘negligent act or omission’ by MWI.”
” ’ “Negligence is either the omission of a person to do something which an ordinarily prudent person would have done under given circumstances or the doing of something which an ordinarily prudent person would not have done under such circumstances. It is not absolute or to be measured in all cases in accordance with some precise standard but always relates to some circumstance of time, place and person.” ’ ” (Minnegren v. Nozar (2016) 4 Cal.App.5th 500, 507 [208 Cal.Rptr.3d 655].) Or, stated similarly, ” ‘Negligence is the failure to use reasonable care to prevent harm to oneself or to others. [¶] A person can be negligent by acting or by failing to act. A person is negligent if he or she does something that a reasonably careful person would not do in the same situation or fails to do something that a reasonably careful person would do in the same situation.’ ” (Ibid., quoting CACI No. 401.)
The HOA offers two arguments in support of its contention that the record contains evidence of MWI‘s negligent acts or omissions sufficient to support the verdict. First, the HOA cites evidence supporting a finding that the pipes supplied by MWI leaked and that the pipes contained “manufacturing . . . defects.”41 The HOA maintains that “[d]rain pipes do not leak their contents into the walls of a structure within a few years of construction in the absence
The only other evidence43 in the record that the HOA cites in support of its contention that MWI was negligent is the testimony of John Morally, MWI‘s founder. The HOA notes that Morally testified that in 1998 or 1999, he traveled to China and went to a foundry where the type of pipe used in the project (Wanze pipe) was manufactured, and that in 2002, MWI began importing Wanze pipe into the United States. This testimony clearly is not sufficient to support a finding that MWI “caused, in whole or in part, a violation of a particular standard as the result of a negligent act or omission.” (
The HOA also contends that “[t]he record supports [a finding] that the SB800 violation was caused, at least in part, by MWI‘s breach of a contract—namely its express and implied warranties.” With respect to the HOA‘s implied warranty theory, the HOA contends that MWI breached the implied warranty of fitness under California Uniform Commercial Code section 2314, subdivision (2)(c). The HOA never presented this theory of liability in the trial court or in its initial briefing on appeal. “[N]ew theories of liability, may not be asserted for the first time on appeal.” (Bardis v. Oates (2004) 119 Cal.App.4th 1, 13–14, fn. 6 [14 Cal.Rptr.3d 89].) Further, in its supplemental brief, the HOA fails to outline the elements of such a claim or to demonstrate how the evidence presented at trial was sufficient to prove each element. (See CACI No. 1231 [“Implied Warranty of Merchantability—Essential Factual Elements,” listing six elements, including that the goods “w[ere] not fit for the ordinary purposes for which such goods are used“].) Under these circumstances, we conclude that the HOA has not demonstrated that the record contains sufficient evidence to support the judgment on a theory that was never presented in the trial court. (See Brandwein v. Butler (2013) 218 Cal.App.4th 1485, 1519 [161 Cal.Rptr.3d 728] [” ‘Bait and switch on appeal not only subjects the parties to avoidable expense, but also wreaks havoc on a judicial system too burdened to retry cases on theories that could have been raised earlier’ “]; 14859 Moorpark Homeowner‘s Assn. v. VRT Corp. (1998) 63 Cal.App.4th 1396, 1403, fn. 1 [74 Cal.Rptr.2d 712] [applying theory of case doctrine to preclude respondent from asserting theory raised “[f]or the first time on appeal and in a cursory fashion“].)
The HOA‘s express warranty theory fails for an even more fundamental reason. The HOA bases its express warranty argument on a warranty that MWI purportedly gave to Sherwood Mechanical, MWI‘s customer for the pipes used in the project. The HOA filed a motion in this court to augment the record with the warranty. (See Cal. Rules of Court, rule 8.155(a)(1) [stating that a “reviewing court may order the record augmented to include” “[a]ny document filed or lodged in the case in superior court“].) However, as the HOA concedes in a declaration offered by its counsel in support of its motion, the warranty was “not admitted into evidence.” (Italics added.) Thus, even assuming that the warranty was ”lodged with the court for trial” (italics added), as the HOA‘s counsel represents in his declaration,44 because the warranty was concededly “not admitted into evidence” (italics
Accordingly, we reject the HOA‘s contention that the record contains evidence to support the verdict on the ground that MWI breached an express or implied warranty.46
Finally, the HOA argues that it presented sufficient evidence to establish MWI‘s liability under a “common law strict products liability standard.” Even assuming, strictly for the sake of argument, that this is so (notwithstanding that the HOA indicated on the eve of trial that it was not pursuing a common law strict liability claim),47 we need not decide whether the HOA presented evidence sufficient to demonstrate the elements of a common law claim premised on the doctrine of strict liability. It is axiomatic that “[t]he doctrine of strict liability imposes legal responsibility, without proof of
Accordingly, we conclude that there is not sufficient evidence in the record to support a finding that MWI caused, in whole or in part, a violation of a standard in the Act as the result of its negligent act or omission or a breach of contract.50
D. The judgment must be reversed and the matter remanded to the trial court with directions to grant MWI‘s motion for a directed verdict and to enter judgment in favor of MWI
In Frank v. County of Los Angeles (2007) 149 Cal.App.4th 805 [57 Cal.Rptr.3d 430] (Frank), the court discussed the proper disposition for an appellate court to direct in case in which a reversal is “based on insufficiency of the evidence.” (Id. at p. 833.) The Frank court stated: ” ’ “When the plaintiff has had full and fair opportunity to present the case, and the evidence is insufficient as a matter of law to support plaintiff‘s cause of action, a judgment for defendant is required and no new trial is ordinarily allowed, save for newly discovered evidence. . . . Certainly, where the plaintiff‘s evidence is insufficient as a matter of law to support a judgment for plaintiff, a reversal with directions to enter judgment for the defendant is proper. [¶] . . . [A] reversal of a judgment for the plaintiff based on insufficiency of the evidence should place the parties, at most, in the position they were in after all the evidence was in and both sides had rested.” ’ ” (Id. at. p. 833;
In its supplemental brief, the HOA suggests that it did not have a ” ’ “full and fair opportunity” ’ ” to present its case. (Frank, supra, 149 Cal.App.4th at p. 833.) The HOA argues, “Here, the issue of ‘a negligent act or omission or breach of contract,’ by MWI was not presented to the jury, and [the HOA] had no reason or opportunity to present such evidence because it was not relevant to the SB800 statute as it was being construed by the trial court.” This argument might have had some force if the trial court had issued a ruling prior to the trial that obviated the need for the HOA to present evidence of an element of its claim. However, that is not the case. The HOA points to no ruling by the trial court nor to any argument by MWI upon which it relied in failing to present sufficient evidence to prove its claim.
On the contrary, the HOA was placed “on notice of the potential importance of such evidence through the motions of defendants” (Cassista v. Community Foods, Inc. (1993) 5 Cal.4th 1050, 1066 [22 Cal.Rptr.2d 287, 856 P.2d 1143]), including a motion for a directed verdict that MWI filed near the end of the trial.51 In filing a motion for a directed verdict in the trial court on the ground of insufficiency of the evidence, MWI afforded the HOA the opportunity to attempt “to introduce whatever further and additional evidence [it] may have at hand to overcome the grounds of the motion.” (Estate of Easton (1931) 118 Cal.App. 659, 662, 5 P.2d 635.)52 Notwithstanding such
Simmons, supra, 213 Cal.App.4th 1035, on which the HOA relies for the proposition that the power to grant a directed verdict “presupposes the directed verdict is sought on an issue that was presented at trial and on which the opposing party had an opportunity to present evidence,” is clearly distinguishable. (Id. at p. 1051.) In Simmons, the trial court granted a plaintiff‘s motion for JNOV on an issue that was “not alleged in plaintiff‘s complaint,” was “not . . . litigated at trial” (id. at p. 1038), and on which the defendant contended it would have presented evidence if the issue had been raised at trial (id. at p. 1043). In this case, we conclude that the trial court erred in denying a defendant‘s motion for a directed verdict and motion for JNOV because the plaintiff failed to present evidence sufficient to prove the claim alleged in its complaint.
Simmons does not constitute authority that a court may not grant a directed verdict where a plaintiff fails to carry its burden of proof on an element of its claim. On the contrary, that is the very purpose of a motion for a directed verdict and motion for JNOV. (Cooper v. Takeda Pharmaceuticals America, Inc. (2015) 239 Cal.App.4th 555, 572 [191 Cal.Rptr.3d 67] [” ‘Typically, if a defendant believes that the plaintiff has not presented substantial evidence to establish a cause of action, the defendant may move for a nonsuit if the case has not yet been submitted to the jury, a directed verdict if the case is about to be submitted, or a [JNOV] following an unfavorable jury verdict. . . . The function of these motions is to prevent the moving defendant from the necessity of undergoing any further exposure to legal liability when there is insufficient evidence for an adverse verdict’ “].)
Finally, the HOA argues that the trial court‘s order denying the JNOV should be affirmed “given the lack of precedent construing Section 936.” we disagree. The statute expressly states the standard of proof that we hold the Act requires and the sole relevant precedent interpreting section 936 stated “a product manufacturer is liable only where its ‘negligent act or omission or a
Accordingly, we conclude that MWI is entitled to judgment because the HOA did not present sufficient evidence to establish MWI‘s liability under the Act.
IV. DISPOSITION
The amended judgment and the trial court‘s order denying MWI‘s motion for JNOV are reversed. The matter is remanded to the trial court with directions to grant MWI‘s motion for a directed verdict, to enter judgment in favor of MWI, and to conduct any other necessary ancillary proceedings. MWI is entitled to costs on appeal.
Huffman, Acting P. J., and Nares, J., concurred.
A petition for a rehearing was denied February 14, 2017, and respondent‘s petition for review by the Supreme Court was denied May 10, 2017, S240489.
Notes
“(a) For purposes of this title, except as provided in subdivision (b), ‘builder’ means any entity or individual, including, but not limited to a builder, developer, general contractor, contractor, or original seller, who, at the time of sale, was also in the business of selling residential units to the public for the property that is the subject of the homeowner‘s claim or was in the business of building, developing, or constructing residential units for public purchase for the property that is the subject of the homeowner‘s claim.
“(b) For the purposes of this title, ‘builder’ does not include any entity or individual whose involvement with a residential unit that is the subject of the homeowner‘s claim is limited to his or her capacity as general contractor or contractor and who is not a partner, member of, subsidiary of, or otherwise similarly affiliated with the builder. For purposes of this title, these nonaffiliated general contractors and nonaffiliated contractors shall be treated the same as subcontractors, material suppliers, individual product manufacturers, and design professionals.” (