Articles Posted in Construction Law

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Phoenix Pipeline filed a second amended complaint (SAC) alleging breach of contract claims related to SpaceX's failure to pay for its services from 2010 to October 2013. The trial court subsequently granted SpaceX's demurrer, which argued that the license issued to Phoenix Plumbing was not sufficient to satisfy the requirements of Business Code section 7031. The Court of Appeal held that Phoenix Pipeline's SAC failed to state a claim for construction related services because it did not allege that Phoenix Pipeline was a licensed contractor. The court explained that Phoenix Pipeline may not rely upon a license issued to another and that section 7031 was not limited to contracts with unsophisticated persons or homeowners. The court held, however, that Phoenix Pipeline adequately alleged that it provided some services for which no contractor license was necessary. Finally, the trial court acted within its discretion in declining to permit an amendment alleging that Phoenix Pipeline was an employee. Accordingly, the court reversed and remanded. View "Phoenix Mechanical Pipeline, Inc. v. Space Exploration Technologies Corp." on Justia Law

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Education Code section 17406 authorizes school districts to use lease-leaseback agreements for construction or improvement of school facilities: the school district leases its own real property to a contractor for a nominal amount, and the contractor agrees to construct or improve school facilities on the property and lease the property and improvements back to the district. At the end of the lease-leaseback agreement, title to the project vests in the school district. California Taxpayers Network brought a reverse validation action (Code Civ. Proc. 863), challenging a lease-leaseback agreement between Mount Diablo School District and Taber Construction, alleging that the Education Code requires “genuine lease-leaseback agreements,” which “provide for financing of the school facility project over time,” but defendants’ lease-leaseback contracts were “sham leases”; that the contracts were illegal because a public bidding process is required for school construction projects; and that Taber provided professional preconstruction services to the District regarding the project before entering the lease-leaseback contracts. The court of appeals affirmed dismissal of claims "that attempt to engraft requirements on the transaction" that are not part of the Education Code. The court reversed in part, holding that the plaintiff did state a conflict of interest claim against Taber sufficient to withstand a demurrer. View "California Taxpayers Action Network v. Taber Construction, Inc." on Justia Law

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The Act makes the builder who sells homes liable for violations without proof of negligence, while general contractors and subcontractors not involved in home sales are liable only if the plaintiff proves they negligently caused the violation in whole or part. The jury found the grading subcontractor, defendant Gerbo Excavating, was not negligent in any respect. The trial court, not the jury, found the builder/seller, Knotty Bear Development, Inc. and Knotty Bear Construction, Inc. (collectively Knotty Bear), liable after Knotty Bear failed to appear for trial. Plaintiffs sought redress from Gerbo under common law negligence theories for the tree damage, because they argued tree damage was not covered by the Act. The Court of Appeal found that plaintiffs failed to show tree damage was not covered by the Act: the jury found Gerbo was not negligent in any respect, even when the jury found building standards were violated. Finding no other basis for reversal, the Court affirmed the trial court’s judgment and post-trial orders. View "Gillotti v. Stewart" on Justia Law

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Escobar was an employee of O’Donnell, a sub-subcontractor of Bayside, which was a subcontractor of Oltmans, the general contractor on a Menlo Park construction project. Escobar sued Oltmans and the property owner, alleging that Oltmans negligently cut and left unsecured a skylight opening in the building under construction, through which Escobar fell while installing scaffolding that O’Donnell was erecting for Bayside. Oltmans filed a cross-complaint against the subcontractors, alleging a right to contractual indemnity and breach of Bayside’s contractual obligation to provide certificates of insurance certifying that Oltmans was covered as an additional insured under liability policies the subcontractors were obligated to obtain. The subcontract provided indemnity to Oltmans for injury claims arising out of the scope of the subcontractor’s work “except to the extent the claims arise out of, pertain to, or relate to the active negligence or willful misconduct” of Oltmans. Reversing the trial court, the court of appeal ruled in favor of Oltmans. Under such a provision the general contractor is precluded from recovering indemnity for liability incurred as a result of its own active negligence but may be indemnified for the portion of liability attributable to the fault of others. The court noted the same question arises as to the meaning of Civil Code section 2782.05, which renders unenforceable an indemnity provision “to the extent the claims arise out of, pertain to, or relate to the active negligence or willful misconduct of that general contractor.” View "Oltmans Construction Co. v. Bayside Interiors, Inc." on Justia Law

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The issue this case presented for the Court of Appeal's review centered on the notice and time requirements of the Right to Repair Act (the act), Civil Code section 895 et seq. The Court granted petitioner William Blanchette's petition for a writ of mandate and directed that the trial court vacate its order staying proceedings pending Blanchette's compliance with the act. Blanchette's compliance with the act was relieved by virtue of real party GHA Enterprises, Inc.'s (GHA) failure to timely acknowledge receipt of Blanchette's notice of a claim. "Contrary to GHA's argument, the act's goal of promptly resolving claims without resort to litigation cannot be achieved by permitting homebuilders to serve tardy responses to claims or to ignore them entirely." View "Blanchette v. Super. Ct." on Justia Law

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Navigators Specialty Insurance Company (Navigators) issued commercial general liability (CGL) insurance policies (the Policies) to Moorefield Construction, Inc. (Moorefield), a licensed general contractor. At issue in this appeal was the meaning, scope, and application of two standard provisions of the Policies. Moorefield appealed the judgment in favor of Navigators, where Navigators sought a declaration of its rights and duties under the Policies. Navigators' lawsuit was corollary to construction defect litigation arising out of the construction of a building to be used as a Best Buy store in Visalia. During the course of litigation, evidence obtained in discovery showed the most likely cause of flooring failure was that flooring tiles had been installed on top of a concrete slab that emitted moisture vapor in excess of specifications. Evidence also showed that Moorefield knew of the results of two tests showing excessive moisture vapor emission from the concrete, yet had directed the flooring subcontractor to install the flooring anyway. Evidence also established the cost to repair the flooring was $377,404. The litigation settled for $1,310,000. On Moorefield's behalf, Navigators contributed its policy limits of $1 million toward the settlement. Moorefield independently contributed an additional $150,000. The remaining $160,000 was made up of contributions from Best Buy Stores, LP (Best Buy), and the defendant subcontractors. In the meantime, Navigators filed this lawsuit seeking a declaration it had no duty under the Policies to defend or indemnify Moorefield. Navigators contended the flooring failure was not a covered occurrence under the Policies because it was not the result of an accident. Following a bench trial, the trial court found there was no covered occurrence under the Policies because Moorefield had directed the flooring subcontractor to install the flooring despite Moorefield's knowledge that moisture vapor emission from the concrete slab exceeded specifications. The trial court found that Moorefield had not met its burden of proving what portion, if any, of the $1 million paid by Navigators came within the supplementary payments provision of the Policies. The trial court also found that Navigators had no duty to make payments under the supplementary payments provision because Moorefield's liability arose from a noncovered claim. The judgment required Moorefield to reimburse $1 million to Navigators. Moorefield's appeal raised two primary issues, one related to the coverage "A" provision of the Policies and the other related to the supplementary payments provision of the Policies. The Court of Appeal found that Navigators had no duty to indemnify Moorefield and was entitled to recoup that portion of the $1 million paid toward settlement that was attributable to damages. The Court also found that Navigators had a duty to compensate Moorefield under the supplementary payments provision of the Policies. That duty was not extinguished by the determination that Navigators had no duty to indemnify. The Court of Appeal therefore affirmed in part, reversed in part, and remanded for a new trial limited to the issue of the amount of the $1 million paid by Navigators that was attributable to damages, not attorney fees and costs of suit under the supplementary payments provision. View "Navigators Specialty Ins. Co. v. Moorefield Const." on Justia Law

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Advent was the general contractor for the Aspen Village project in Milpitas. Advent subcontracted with Pacific, which subcontracted with Johnson. Advent was covered by a Landmark insurance policy and a Topa excess insurance policy. Johnson was covered by National Union primary and excess policies. Kielty, a Johnson employee, fell down an unguarded stairway shaft at the site and sustained serious injuries. Kielty sued Advent, which tendered its defense to its insurers and to National Union. National Union accepted under a reservation of rights. Kielty settled for $10 million. Various insurers, including Topa and National Union (under its primary policy), contributed to the settlement. National Union did not provide coverage under its excess policy. Advent sought a declaration that it was an “additional insured” under that excess policy. Topa intervened, seeking equitable contribution from National Union, and equitable subrogation. Advent dismissed its complaint with prejudice. Summary judgment was entered against Topa, for National Union. The court of appeal affirmed. While Topa’s policy was vague, National Union’s excess policy states that coverage will not apply until “the total applicable limits of Scheduled Underlying Insurance have been exhausted by the payment of Loss to which this policy applies and any applicable, Other Insurance have been exhausted by the payment of Loss.” View "Advent, Inc. v. National Union Fire Insurance Co. of Pittsburgh" on Justia Law

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The Foundation provides performing arts and social justice programs. Presidio Trust granted the Foundation a lease (through 2013) at below-market rates for Building 1158. The Foundation remodeled at a cost of over $300,000. Building 1158 offered a safe drop-off area for children, adequate parking, and exclusive use of the building. The Foundation’s operational revenues increased from $300,000 in 2007 to $464,000 in 2010. In 2009, the California Department of Transportation (Caltrans) began to construct a south access to the Golden Gate Bridge, which required the use of property controlled by Presidio Trust. The Trust agreed to deliver specified property—including Building 1158. Caltrans informed the Foundation it would demolish Building 1158. The Foundation began to search for another location; no comparable space was immediately found. The Foundation cancelled its 2010 summer program and its Annual Benefit. It lost students, donors, staff, and partners. The Foundation vacated Building 1158 in 2011. Caltrans paid $107,000 as just compensation for the Foundation‘s lost improvements. Weeks after vacating, the Foundation leased space in Building 386, which costs more, offers less functional space, lacks a safe drop-off zone, has less parking, lacks evening public transportation, shares restrooms with a business, and is an historical building that limits configuration of space. The Foundation sought compensation for loss of goodwill. Caltrans denied the claim and sought declaratory relief. The trial court found that, although the Foundation demonstrated it had goodwill before the taking and lost goodwill due to the taking, it did not prove a calculated “quantitative” loss. The court of appeal reversed, finding that an expert‘s quantification based on a change in cash flow was sufficient for the threshold determination of entitlement to compensation. View "Department of Transportation v. Presidio Performing Arts Foundation" on Justia Law

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Jeffrey Callaghan hired Dunn's Designer Pools (Dunn's), a landscape and pool contractor, to build a pool and spa at his home. Victor Regalado, a Dunn's employee, suffered injuries when he installed a propane fueled pool heater on Callaghan's property. Regalado sued Callaghan for negligence and premises liability. The jury found Callaghan was negligent; the trial court ultimately entered judgment against Callaghan in the amount of approximately $3 million. Callaghan appealed, arguing: (1) the court erred by failing to instruct the jury that a person who hires an independent contractor was not liable for injuries to the contractor's employee unless the hirer's negligent exercise of retained control "affirmatively contributed" to the employee's injury; (2) insufficient evidence supported the jury's verdicts on both premises liability and negligence; (3) Regalado's counsel committed misconduct by urging the jury to base its verdict on protecting the community; (4) the trial court erred by permitting Regalado to recover past wages because Dunn's had continued to pay his salary after the accident; and (5) the jury's award of future medical costs had to be reduced because it was not supported by substantial evidence. Rejecting all of Callaghan's arguments, the Court of Appeals affirmed the judgment. View "Regalado v. Callaghan" on Justia Law

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Concrete Construction (Contractor) was sued by employees of Nibbi Concrete, who were injured after a shoring system designed by Contractor collapsed. Subsequently, Contractor sued Employer for indemnification based on a specific provision in the parties’ contract. The trial court dismissed, relying on the allegations in the underlying lawsuit that set forth claims only against Contractor and not against Employer. The court of appeal reversed, stating that the allegations in the underlying lawsuit are not determinative of Contractor’s claim for indemnity. View "Aluma Systems Concrete Constr. of Cal. v. Nibbi Bros., Inc." on Justia Law