Ric Blumhardt and Allan Isbell Achieve Another Appellate Victory in Gundogdu v. King Mai, Inc.
The Court of Appeal for the First Appellate District, Division Three, recently published its decision in Gundogdu v. King Mai, Inc. (2009) 171 Cal.App.4th 310. King Mai, Inc. was represented on appeal by Archer Norris's Ric Blumhardt and Allan Isbell and Lorber, Greenfield & Polito, LLP's Ron U. Lunski. Together, they successfully convinced the Court of Appeal to affirm summary judgment for King Mai, Inc. on the grounds that the Gundogdus’ claims were barred by the ten-year statute of limitation in Code of Civil Procedure section 337.15 as applied to a claim for defective construction of residential property.
In 1995, King Mai constructed a home, which it sold to the Gundogdus in 1997, sixteen months after completion of construction. The Gundogdus subsequently brought an action against King Mai for negligence and breach of implied warranty arising from alleged defects in the home’s original construction. The action was brought more than ten years after construction of the home, but less than ten years after it was sold to the Gundogdus by King Mai. King Mai successfully moved for summary judgment on the ground that the Gundogdus’ action was completely barred by section 337.15.
On appeal, the Gundogdus argued that the ten-year statute of limitation had been equitably tolled pursuant to section 337.15, subdivision (e), during the sixteen-month period of King Mai’s passive ownership of the property and completion of construction.
The Court of Appeal rejected this argument, observing that the defects the Gundogdus claimed to have caused their damages were defects that occurred during the construction of the building; not during King Mai’s passive ownership of it. To interpret section 337.15(e) as tolling the ten-year statute under such circumstances would be to circumvent the very protection that the statute of limitation was designed to avoid – a contractor’s indefinite exposure to liability for its work. Because the Gundogdus’ complaint was necessarily premised on King Mai’s liability as the developer of the property – and not as its owner – there was no reason to apply the exception to the ten-year statute in subdivision (e).
The Gondogdus also asserted that King Mai was equitably estopped from asserting the ten-year statute pursuant to Lantzy v. Centex Homes (2003) 31 Cal.4th 363. The Gundogdus argued that King Mai falsely promised to make repairs to the property, on which promise the Gundogdus relied in delaying the filing of their complaint for damages. However, the Court of Appeal observed that the Gundogdus acknowledged on summary judgment that they were aware of defects in the home by February 11, 2004 at the latest, at which time King Mai unequivocally informed the Gundogdus it would make no further repairs to the property. The limitations period did not expire until November of 2005, and the Gundogdus failed to file their suit until April of 2006. Thus, the Gundogdus were precluded as a matter of law from arguing that they proceeded diligently once the truth of the condition of their property was discovered, as necessary to sustain a claim of equitable estoppel.
Through its analysis, the Court of Appeal underscored the different protections afforded to contractors and owners under section 337.15 as a consequence of each entity’s distinct liabilities with respect to property. It also provides valuable guidance to trial and appellate courts on the importance of the distinction between liabilities for defects arising in the course of construction and those arising after completion.
