Over six years following the plaintiff HOA’s initial 2008 construction and design defect complaint, Beacon Residential v. Catellus Third and King, LLC, et al. continues to generate new law and to address legal issues of import and interest to those in the construction defect community.
In its latest ruling, a California Superior Court found that the plaintiff HOA does not own claims related to alleged solar heat-gain as they belong to the former owner(s) of the project. In reaching its decision, the court relied heavily upon the findings in Krusi v. Amoroso Construction Co., Inc., 81 Cal. App.4th, 995 (2000), in which the court found that subsequent owners of property do not own claims for known defects that arose and caused damage prior to their ownership.
In its complaint, the HOA alleged causes of action for design and construction liability related to solar heat-gain and ventilation. Members of the HOA asserted their units were becoming too hot due to the alleged defects. The HOA suit named the two developers, the general contractor and its subcontractors, and the two project architects, HKS and SOM.
Of particular importance to the court’s ruling was the fact that the project was sold by the first developer to the second developer, who then sold the units as condominiums and formed the plaintiff HOA. The plaintiff’s complaint alleged that both developers knew of the alleged solar heat-gain-related claims, which the court considered a judicial admission by the plaintiff. Given this admission regarding prior knowledge by the developers, and the fact that the developers had previously suffered damages, the court found that the heat-gain-related causes of action were owned by one or both of the developers, but certainly not the HOA.
On October 1, 2014, the court issued an order sustaining both architects’ motions to strike. In making its ruling, the court relied upon the following language from Krusi:
[A] duty may run from an architect, engineer, or contractor to a subsequent owner of real property. It does not mean that, in a case implicating damage to such property, once a cause of action in favor of a prior owner accrues, another cause of action against the same defendant or defendants can accrue to a subsequent property owner – unless, of course, the damage suffered by that subsequent owner is fundamentally different from the earlier type.
In short, the court ruled that when alleged defects of the same type cause damages to a prior owner or owners of a building, the subsequent owner (herein, the HOA) does not own the cause of action for damages caused by the same alleged defects. The plaintiff has verbally noted its intent to take a writ regarding the subject ruling, and we await the plaintiff’s next move. For now, however, the ruling that a subsequent owner of a property does not own a cause of action if the prior owner knew of the alleged defects and suffered damages therefrom, has implications for all who practice law in the arena of construction defect litigation, and their respective clients.