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Construction Defect

The following cases address mutiple issues that arise in construction defect litigation. For more information about construction defect litigation, visit our selection of educational articles on construction defects and our construction defect litigation practice area.

  • Aas v. Superior Court

    Aas v. Superior Court

    Summary by Mary M. Howell, Esq.:

    Facts

    This matter involved two construction defect actions brought by a condominium homeowners association and owners of single-family homes in a subdivision (collectively, “Plaintiffs”) against a developer, a contractor, and subcontractors (collectively, “Defendants”). Plaintiffs alleged their dwellings suffered from a variety of construction defects. Plaintiffs asserted causes of action for negligence, strict liability, and breach of express and implied warranty. In pretrial proceedings, Defendants moved to exclude evidence of those alleged construction defects that had not caused property damage. The trial court granted Defendants’ motions as to the tort claims. Plaintiffs sought review of the rulings by petition for writ of mandate. The Court of Appeal denied the petition. The California Supreme Court granted review of that decision and affirmed.

    Held

    The California Supreme Court concluded that Plaintiffs could not recover damages in negligence or strict liability from the developer, contractor or subcontractors who built their homes for existing construction defects that had not yet caused either property damage or personal injury. The court explained that while tort law provides a remedy for construction defects that cause property damage or personal injury, the “economic loss rule” precludes recovery for defects that have not yet resulted in property damage or personal injury.

    NOTE

    In response to the holding in Aas, the California Legislature enacted Civil Code §895 et seq., also known as the Right to Repair Act (the “Act”). The Act establishes a set of building standards pertaining to new residential construction, and provides homeowners with a cause of action against, among others, builders and individual product manufacturers for violation of the standards. The Act makes clear that upon a showing of violation of an applicable standard, a homeowner may recover economic losses from a builder without having to show that the violation caused property damage or personal injury. In such an instance, the Act abrogates the economic loss rule, thus legislatively superseding Aas.

    *** End Summary ***

    Affan v. Portofino Cove
    (2010) 189 Cal.App.4th 930

    719*719 Procopio, Cory, Hargreaves & Savitch, Steven M. Strauss, Edward I. Silverman and Victor M. Felix, San Diego, for Petitioners Alan O. Aas et al.

    Epsten & Grinnell, Douglas W. Grinnell, San Diego, Luis E. Ventura, El Centro; The Law Offices of Duane E. Shinnick, Silldorf, Shinnick & Duignan and Duane E. Shinnick, San Diego, for Petitioner Provencal Community Association and for Consumer Attorneys of California as Amicus Curiae on behalf of Petitioners Alan O.Aas et al.

    Ian Herzog, Santa Monica; Douglas Devries, Sacramento; Roland Wrinkle, Woodland Hills; Harvey R. Levine, San Diego; Robert Steinberg, Los Angeles; Thomas G. Stolpman, Long Beach; William D. Turley, San Diego; Mary E. Alexander, Menlo Park; Joseph Harbison III, Sacramento; Bruce Broilett; Wayne McClean, Woodland Hills; Leonard Sacks, Granada Hills; Tony Tanke, Redwood City; Lea-Ann Tratten; Steven J. Kleifield, Los Angeles; David Rosen; Moses Lebovits, Los Angeles; Christine Spagnoli; James Sturdevant, San Francisco; Daniel Smith; Deborah David, Los Angeles; Lawrence Drivon; Thor Emblem, Escondido; Rick Simons; David Casey, Jr., San Diego, Kasdan, Simonds, McIntyre, Epstein & Martin and Kenneth S. Kasdan, Irvine, for Consumer Attorneys of California as Amicus Curiae on behalf of Petitioners Alan O. Aas et al.

    720*720 Verboon, Whitaker & Peter, Mark A. Milstein and Michael T. Whitaker, Los Angeles, for Southern California Apartment Owners Association as Amicus Curiae on behalf of Petitioners Alan O. Aas et al.

    Wolf, Rifkin & Shapiro, Leslie S. Marks, Los Angeles, and Douglas A. Lusson, San Diego, for League of California Homeowners as Amicus Curiae on behalf of Petitioners Alan O. Aas et al.

    Berding & Weil and James O. Devereaux, Alamo, for the Executive Council of Homeowners as Amicus Curiae on behalf of Petitioners Alan O. Aas et al.

    Berger & Hopkins, Jane Francis Hopkins and A. Alan Berger, San Jose, for the Structural Engineers Association of California as Amicus Curiae on behalf of Petitioners Alan O. Aas et al.

    Orbach & Huff, David M. Huff and Eric P. Weiss, Los Angeles, for Coalition of American Structural Engineers, Park Purdue Homeowners Association, Angelina Heights Homeowners Association and Silverado Oaks Homeowners Association as Amici Curiae on behalf of Petitioners Alan O. Aas et al.

    Williams, Wester, Hall & Nadler and Scott A. Williams, Greenbrae, as Amici Curiae on behalf of Petitioners Alan 0. Aas et al.

    Burdman & Benson and Linda Angle-Keny, San Diego, as Amici Curiae on behalf of Petitioners Alan 0. Aas et al.

    No appearance for Respondent.

    Newmeyer & Dillion, Gregory L. Dillion, Timothy S. Menter, Gene M. Witkin, Newport Beach; Lincoln, Gustafson & Cercos, Thomas J. Lincoln and Charles K. Egan, San Diego, for Real Parties in Interest the William Lyon Company and Lyon Communities, Inc.

    Dale, Braden & Hinchcliffe and Suzanne M. Martin, for Real Parties in Interest Ben F. Smith, Inc., and B & L Plastering.

    Wilson, Elser, Moskowitz, Edelman & Dicker, Andrew J. Blackburn, Long Beach, and William S. Roberts, San Diego, for Real Parties in Interest West Coast Sheet Metal, Inc., and Ben F. Smith, Inc.

    Kring & Brown, Jeffrey A. Lake, San Diego, and Jon H. Van de Grift, for Real Parties in Interest Ben F. Smith, Inc., and New Continental Tile & Marble Co., Inc.

    Maxie Rheinheimer Stephens & Vrevich, Barry M. Vrevich, Darin L. Wessel, San Diego, Kelegian & Thomas and Michael Paul Thomas, Newport Beach, for Real Party in Interest Branco Corporation.

    Bullard & Olin, Robert M. Granafei and Lee H. Graham, Orange, for Real Party in Interest Cal West Nurseries, Inc.

    Brownwood, Rice & Zurawski and Michael F. Saydah, San Diego, for Real Parties in Interest C.R.E. Electric and Ghianni Corporation.

    Acker, Kowalick & Whipple, Anthony H. Whipple, W. Frederck Kowalick, Linwood Warren, Jr., Catherine L. Rhodes and Tawnya L. Southern, for Real Party in Interest Premier Window Products, Inc.

    Farmer, Weber & Case, David Weber; The Law Office of Mark Siegel and Mark Siegel, for Real Party in Interest Sun Plumbing Company, Inc.

    Kolod, Wager & Gordon, Scott M. Kolod, Jerome A. Wager, San Diego, Vekeno Kennedy; Law Offices of Elisa J. Nemeth and Elisa J. Nemeth, for Real Party in Interest Allstate Plumbing.

    Cozad & Krutcik and Ronald J. Cozad, Mission Viejo, for Real Party in Interest Schmid Insulation Contractors, Inc.

    Berger, Kahn, Safton, Moss, Figler, Simon & Gladstone, Timothy A. Nicholson and Stephen L. Weber, Irvine, for Real Party in Interest Surecraft Supply, Inc.

    Perkins & Miltner, San Diego, and Timothy E. Salter, for Real Party in Interest Bowers Construction Co.

    Callahan, McCune & Willis and Norma Marshal, San Diego, for Real Party in Interest Frank Bowers Construction.

    721*721 Balestreri, Pendleton & Potocki, Thomas A. Balestreri, Jr., Mary B. Pendleton, Michael M. Freeland, San Diego, Maurine P. Brand; Kring and Brown, Irvine, and Jeffrey A. Lake, San Diego, for South Coast Framers, Inc., Alta Drywall, Inc., West Coast Sheet Metal and D.J. Drywall, Inc., as Amici Curiae on behalf of Real Parties in Interest.

    Lewis, D’Amato, Brisbois & Bisgaard, Costa Mesa, Robert V. Closson, San Diego, Terrell A. Quealy and Judith A. Lewis for United National Insurance Company as Amicus Curiae on behalf of Real Parties in Interest.

    John H. Findley, Sharon L. Browne, Sacramento, and Stephen R. McCutcheon, Jr., for Pacific Legal Foundation as Amicus Curiae on behalf of Real Parties in Interest.

    Dale, Braden & Hinchcliffe, George D. Dale, Suzanne M. Martin; Perkins & Miltner, San Diego, Timothy E. Salter; and Kathryn Turner-Arsenault, Escondido, for the Construction Defect Defense Action Coalition as Amicus Curiae on behalf of Real Parties in Interest.

    Fred J. Hiestand, Sacramento, for the Association for California Tort Reform as Amicus Curiae on behalf of Real Parties in Interest.

    COX, Castle & Nicholson, Sandra C. Stewart, Jeffrey D. Masters, Debbie L. Freedman, Los Angeles; Gray, Cary, Ware & Freidenrich, San Diego, and Jonathan B. Sokol, Los Angeles, for the Building Industry Legal Defense Foundation and the California Building Industry Association as Amici Curiae on behalf of Real Parties in Interest.

    White, Gentes & Garcia, Timothy S. Noon and Charles R. Bongard, San Diego, for the Associated General Contractors of America, San Diego Chapter, Inc., as Amicus Curiae on behalf of Real Parties in Interest.

    Thelen Reid & Priest, Gary L. Fontana, Hilary N. Rowen, James A. Riddle, San Francisco; Craig A. Berrington and Laura L. Kersey, Washington, D.C., for American Insurance Association as Amicus Curiae on behalf of Real Parties in Interest.

    Parker & Stanbury, Jenna L. Price and Mary-Tyler Crenshaw, for West Coast Sheet Metal and H & D Construction as Amici Curiae on behalf of Real Parties in Interest.

    Morris, Polich & Purdy, Randy Koenig and Gary L. Jacobsen, San Diego, as Amici Curiae on behalf of Real Parties in Interest.

    Gibbs, Giden, Locher & Turner, Barry C. Vaughan and Michael I. Giden, Los Angeles, for CalMat Co. as Amicus Curiae.

    WERDEGAR, J.

    In this case we are asked to decide whether homeowners and a homeowners association may recover damages in negligence from the developer, contractor and subcontractors who built their dwellings for construction defects that have not caused property damage. Plaintiffs would find an affirmative answer in the tort of “negligent interference with prospective economic advantage” described in J’Aire Corp. v. Gregory (1979) 24 Cal.3d 799, 804-805, 157 Cal.Rptr. 407, 598 P.2d 60. Applying settled law limiting the recovery of economic losses in tort actions (Seely v. White Motor Co. (1965) 63 Cal.2d 9, 18, 45 Cal.Rptr. 17, 403 P.2d 145), we answer the question in the negative and, thus, affirm the decision of the Court of Appeal.

    I. Background

    This matter comes to us on review of consolidated writ proceedings affecting two cases in the superior court. Plaintiffs in Aas et al. v. William Lyon Company et al.(Super.Ct. San Diego County, 1996, No. 695611) (Aas own the single-family homes in the Belle Fleur subdivision. Plaintiff in Provencal Community Association v. William Lyon Company et al. (Super.Ct. San Diego County, 1996, No. 694688) (Provencal) is the homeowners association 722*722 responsible for managing and maintaining the Provencal condominium project. Defendants (as relevant here) include the William Lyon Company and Lyon Communities, Inc. (collectively Lyon), which served as developer and general contractor of Belle Fleur and Provencal, and the many subcontractors who participated in those projects.

    Plaintiffs in each case allege their dwellings suffer from a variety of construction defects affecting virtually all components and aspects of construction. Based on these defects, plaintiffs assert causes of action for negligence, strict liability, breach of implied warranty and, in the Aas case alone, breach of contract and express warranty. Plaintiffs in both cases seek, among other things, the cost of repairing the alleged defects. Additionally, plaintiffs in Aas expressly seek damages representing the diminution in Value of their residences.

    Trial has not yet commenced. In pretrial proceedings, defendants in both cases moved for orders in limine excluding evidence of those alleged construction defects that have not caused property damage. (There is no claim of personal injury.) Plaintiff in Provencal responded with an offer of proof asserting that some of the alleged defects violate provisions of the applicable building codes intended to prevent harm to life, health and property.[1] Plaintiff acknowledged, however, that many of the defects enumerated in defendants’ motions have not actually caused property damage. The same is true in Aas. After extensive oral argument in each case, the trial court granted defendants’ motions as to plaintiffs’ tort claims only.[2] With thecourt’s encouragement, plaintiffs sought review of the rulings in limine by petition for writ of mandate. The Court of Appeal, after issuing an alternative writ, denied the petitions. We granted review of that decision.

    In granting defendants’ motions, the trial court did not create or adopt a definitive list of construction defects to be excluded at trial. Instead, the court simply excluded “evidence of [defects] … that have not resulted in bodily injury or physical property damage, i.e., [defects causing only] `economic loss’….” The trial court illustrated the possible effect of its ruling with the example of “a home with no resultant damages at all, but everybody agrees that the flashing’s not lapped properly under the industry standards, the [Uniform Building Code], whatever, but it hasn’t resulted in any leaks; everybody agrees that the tile is overextended, that is, it doesn’t have the overlap of three inches that’s called for by the manufacturer; that 723*723 you have a nailing pattern on the shear walls which does not comply with the applicable provision in the [Uniform Building Code], but the house is still standing and hasn’t started swaying….” The court and the parties seemed to recognize that further hearings (see generally Evid.Code, § 402 [procedure for determining preliminary facts]) would be necessary to determine which alleged defects would, and would not, be submitted to the trier of fact in connection with plaintiffs’ tort claims.[3]

    The absence of a definitive list of excluded defects is of no consequence because the issue before us is one of law. While a ruling excluding evidence is not ordinarily subject to review by writ (People v. Municipal Court (Ahnemann) (1974) 12 Cal.3d 658, 660, 117 Cal.Rptr. 20, 527 P.2d 372) and typically is reviewed for abuse of discretion on appeal (People v. Williams (1997) 16 Cal.4th 153, 197, 66 Cal.Rptr.2d 123, 940 P.2d 710), a motion to exclude all evidence on a particular claim is subject to independent review as the functional equivalent of a common law motion for judgment on the pleadings (Edwards v. Centex Real Estate Corp. (1997) 53 Cal.App.4th 15, 26-27, 61 Cal.Rptr.2d 518; Clemens v. American Warranty Corp.(1987) 193 Cal.App.3d 444, 451-52, 238 Cal.Rptr. 339; see generally 6 Witkin, Cal. Procedure (4th ed. 1997) Proceedings Without Trial, § 176, pp. 589-591) or, if decided in light of evidence produced during discovery, a motion for nonsuit (Edwards v. Centex Real Estate Corp., at p. 27, 61 Cal.Rptr.2d 518). Understood as a motion for judgment on the pleadings, the dispositive question is whether plaintiffs may state a cause of action for construction defects that have not caused property damage. (Cf. id. at p. 26, 61 Cal.Rptr.2d 518.) Understood as a motion for nonsuit, the question is whether, disregarding conflicting evidence, indulging in every legitimate inference that may be drawn from the evidence, and viewing the record in the light most favorable to plaintiffs, evidence of construction defects that have not caused property damage will support a judgment in plaintiffs’ favor. (Cf. id. at pp. 27-28, 61 Cal.Rptr.2d 518; see also Casey v. Overhead Door Corp. (1999) 74 Cal.App.4th 112, 123-124, 87 Cal.Rptr.2d 603 [offer of proof may defeat nonsuit based on exclusion of evidence].) Accordingly, however we view the orders on review, the sole question before us is one of law.

    II. Discussion

    We turn, then, to the question at hand: May plaintiffs recover in negligence from the entities that built their homes a money judgment representing the cost to repair, or the diminished value attributable to, construction defects that have not caused property damage? Plaintiffs define construction defects as deviations from the applicable building codes or industry standards. Strict liability is not here at issue. While plaintiffs have asserted strict liability claims, they no longer argue that strict liability provides a remedy for defects that have not caused property damage. We need not address liability for construction defects that have caused property damage, if any have, because the trial court’s ruling does not prevent plaintiffs from introducing evidence of such defects. Nor, finally, does the ruling prevent plaintiffs from introducing any evidence relevant to their claims for breach of contract or warranty, assuming those claims survive to trial, even if that evidence has been excluded for the purposes of plaintiffs’ tort claims.

    This procedural posture makes the question we address fairly narrow. The question,724*724 however, is not simple, because it arises from the nebulous and troublesome margin between tort and contract law. (See generally Erlich v. Menezes (1999) 21 Cal.4th 543, 550-551, 87 Cal.Rptr.2d 886, 981 P.2d 978; Freeman & Mills, Inc. v. Belcher Oil Co. (1995) 11 Cal.4th 85, 105-107, 44 Cal.Rptr.2d 420, 900 P.2d 669(cone. & dis. Opn. of Mosk, J.).) Speaking very generally, tort law provides a remedy for construction defects that cause property damage or personal injury. Focusing on the conduct of persons involved in the construction process, courts in this state have found such a remedy in the law of negligence.[4] Viewing the home as a product, courts have also found a tort remedy in strict products liability,[5] even when the property damage consists of harm to a sound part of the home caused by another, defective part.[6] For defective products and negligent services that have caused neither property damage nor personal injury, however, tort remedies have been uncertain. Any construction defect can diminish the value of a house. But the difference between price paid and value received, and deviations from standards of quality that have not resulted in property damage or personal injury, are primarily the domain of contract and warranty law or the law of fraud, rather than of negligence. In actions for negligence, a manufacturer’s liability is limited to damages for physical injuries; no recovery is allowed for economic loss alone. (Seely v. White Motor Co., supra, 63 Cal.2d 9, 18, 45 Cal. Rptr. 17, 403 P.2d 145.) This general principle, the so-called economic loss rule, is the primary obstacle to plaintiffs’ claim.[7]

    Plaintiffs contend the decision in J’Aire Corp. v. Gregory, supra, 24 Cal.3d 799, 157 Cal.Rptr. 407, 598 P.2d 60 (J’Aire ) overcomes this obstacle. According to plaintiffs, when the parties occupy the “special relationship” defined in J’Aire (id. at p. 804, 157 Cal.Rptr. 407, 598 P.2d 60), there is both a duty to avoid negligently 725*725 injuring a person’s economic interests and a right to recover for such injury, even though unaccompanied by any injury to person or property. Before addressing J’Aire’ssignificance and application to this case, we review the law to which J’Aire is said to constitute an exception.

    Formerly, after a builder had completed a structure and the purchaser had accepted it, the builder was not liable to a third party for damages suffered because of the work’s condition, even though the builder was negligent. (E.g., Fanjoy v. Seales(1865) 29 Cal. 243, 249-250; see also Hale v. Depaoli, supra, 33 Cal.2d 228, 230, 201 P.2d 1 [reviewing the former law].) The purchaser, of course, had remedies against the builder in contract and warranty. But injured third parties had no clear remedy until we, following the trend that began with MacPherson v. Buick Motor Co.(1916) 217 N.Y. 382, 111 N.E. 1050, qualified the general rule exonerating manufacturers from third party claims with an exception applicable whenever “`the nature of a [manufactured] thing is such that it is reasonably certain to place life and limb in peril when negligently made….'” (Kalash v. Los Angeles Ladder Co. (1934) 1 Cal.2d 229, 231-232, 34 P.2d 481, quoting MacPherson v. Buick Motor Co., supra,111 N.E. 1050,1053.) Having already held that the manufacturers of defective ladders (Kalash v. Los Angeles Ladder Co., at pp. 231-233, 34 P.2d 481), elevators (Dahms v. General Elevator Co. (1932) 214 Cal. 733, 737-742, 7 P.2d 1013), and tires (Nebelung v. Norman (1939) 14 Cal.2d 647, 654, 96 P.2d 327) could be liable to persons not in contractual privity with them yet foreseeably injured by their products, we easily applied the same rule to someone responsible for part of a house, i.e., a defective railing (Hale v. Depaoli at pp. 230-232, 201 P.2d 1).

    We first recognized a remedy in the law of negligence for construction defects causing property damage, as opposed to personal injury, in Stewart v. Cox, supra,55 Cal.2d 857, 13 Cal.Rptr. 521, 362 P.2d 345. There, we upheld a homeowner’s judgment against a subcontractor who had negligently applied concrete to the inside of a swimming pool, thereby causing the release of water that damaged the pool, lot and house. In our opinion we noted, and seemingly were influenced by, the “`decisions … plac[ing] building contractors on the same footing as sellers of goods, and … [holding] them to the general standard of reasonable care for the protection of anyone who may foreseeably be endangered by the negligence, even after acceptance of the work.'” (Id. at p. 862, 13 Cal.Rptr. 521, 362 P.2d 345, (quoting Prosser, Torts (2d ed.1955) pp. 517-519.) The deciding factor in finding liability, however, appears to have been our own then recent decision in Biakanja v. Irving(1958) 49 Cal.2d 647, 320 P.2d 16 (Biakanja). In Biakanja, we had held that the intended beneficiary of a failed testamentary gift could recover damages from a notary public who, practicing law without a license, negligently prepared the will and failed to have it properly solemnized. Because Biakanja is the acknowledged basis for the later decision in J’Aire, supra, 24 Cal.3d 799, 804, 157 Cal.Rptr. 407, 598 P.2d 60, the case on which plaintiffs here primarily rely, it will be discussed in more detail later (101 Cal.Rptr.2d at p. 730, 12 P.3d at p. 1136, post). At this point, it suffices to note that Biakanja held that the negligent performance of a contractual obligation, resulting in damage to the property or economic interests of a person not in privity, could support recovery if the defendant was under a duty to protect those interests. (Biakanja, at pp. 648-650, 320 P.2d 16.) “The determination whether in a specific case the defendant will be held liable to a third person not in privity,” we wrote, “is a matter of policy and involves the balancing of various factors….” (Id. at p. 650, 320 P.2d 16.)[8] 726*726 Applying those factors to the negligent concrete subcontractor inStewart v. Cox, supra, 55 Cal.2d 857, 13 Cal.Rptr. 521, 362 P.2d 345), we determined that he should not be exempted from liability proximately caused by his negligence. His work, we explained, was specifically intended to affect the plaintiffs; damage to their property was foreseeable if the work were negligently done; and serious damage actually occurred. (Id at p. 863, 13 Cal.Rptr. 521, 362 P.2d 345.)

    Two years later, we again applied Biakanja, supra, 49 Cal.2d 647, 320 P.2d 16, to uphold a judgment for property damage caused by negligent residential construction. (Sabella v. Wisler, supra, 59 Cal.2d 21, 29, 27 Cal.Rptr. 689, 377 P.2d 889 (Sabella).) The defendant had built a house and offered it for sale to the general public. As it turned out, the defendant’s negligent preparation of the lot, in combination with a subcontractor’s careless plumbing work, later caused leaks, subsidence and damage to the house. The purchasers sued for negligence. The builder, arguing against the imposition of tort liability, sought to distinguish the recent decision inStewart v. Cox, supra, 55 Cal.2d 857, 13 Cal.Rptr. 521, 362 P.2d 345 (Stewart), on the ground “that damage to property other than the swimming pool [in Stewart] was foreseeable, [whereas] … the only harm foreseeable [in Sabella] … was damage to the house itself.” (Sabella, at p. 29, 27 Cal.Rptr. 689, 377 P.2d 889.) We rejected the asserted distinction because we had already determined “in the Stewart case that the liability of a contractor should be determined by the consideration and weighing of the various factors bearing upon liability [i.e., the factors set out in Biakanja at page 650, 320 P.2d 16], rather than by resort to special rules or distinctions.” (Sabella, at pt 29, 27 Cal. Rptr. 689, 377 P.2d 889.)

    In the years following Sabella, supra, 59 Cal.2d 21, 27 Cal.Rptr. 689, 377 P.2d 889,the law governing tort remedies for construction defects diverged into two distinct theories: (l) strict products liability; and (2) the theory of negligence outlined inBiakanja, supra, 49 Cal.2d 647, 320 P.2d 16, and further developed in J’Aire, supra,24 Cal.3d 799, 157 Cal.Rptr. 407, 598 P.2d 60.

    We first embraced the doctrine of strict products liability in Greenman v. Yuba Power Products, Inc. (1963) 59 Cal.2d 57, 27 Cal.Rptr. 697, 377 P.2d 897, just a week after deciding Sabella, supra, 59 Cal.2d 21, 27 Cal.Rptr. 689, 377 P.2d 889. A few years later, the court in Kriegler v. Eichler Homes, Inc., supra, 269 Cal.App.2d 224, 74 Cal.Rptr. 749 (Kriegler ), applied the new tort to mass-produced homes, reasoning that in “today’s society, there are no meaningful distinctions between [the] mass production and sale of homes and the mass production and sale of automobiles and that the pertinent overriding policy considerations are the same.” (Id. at p. 227, 74 Cal.Rptr. 749; see also Avner v. Longridge Estates, supra, 272 Cal.App.2d 607, 609-615, 77 Cal.Rptr. 633 [examining and following Kriegler].) The relevant policy considerations, the Kriegler court explained, were the average home buyer’s reliance on the builder’s skill and implied representations of fitness, and the public interest in assigning the cost of foreseeable injuries to the developer who created the danger. (Kriegler, at p. 228, 74 Cal. Rptr. 749; cf. Greenman v. Yuba Power Products, Inc., at pp. 63-64, 27 Cal.Rptr. 697, 377 P.2d 897.)

    While these decisions applied the doctrine of strict liability to mass-produced homes,[9] they did not create a remedy for 727*727 defects that have not caused property damage or personal injury. Whatever the product, whether homes or automobiles, strict liability affords a remedy only when the defective product causes property damage or personal injury. The tort does not support recovery of damages representing the lost benefit of a bargain, such as the cost of repairing a defective product or compensation for its diminished value. We explained this principle in Seely v. White Motor Co., supra, 63 Cal.2d 9, 45 Cal.Rptr. 17, 403 P.2d 145 (Seely ). “The distinction that the law has drawn between tort recovery for physical injuries and warranty recovery for economic loss,” we wrote, “is not arbitrary and does not rest on the `luck’ of one plaintiff in having an accident causing physical injury. The distinction rests, rather, on an understanding of the nature of the responsibility a manufacturer must undertake in distributing his products.” (Id. at p. 18, 45 Cal.Rptr. 17, 403 P.2d 145.) A manufacturer “can appropriately be held liable for physical injuries caused by defects by requiring his goods to match a standard of safety,” but not “for the level of performance” of its products unless the manufacturer “agrees that the product was designed to meet the consumer’s demands.” (Ibid.) Similarly, “[a] consumer should not be charged at the will of the manufacturer with bearing the risk of physical injury when he buys a product on the market. He can, however, be fairly charged with the risk that the product will not match his economic expectations unless the manufacturer agrees that it will.” (Ibid.)

    Applying these principles, we concluded in Seely, supra, 63 Cal.2d 9, 45 Cal.Rptr. 17, 403 P.2d 145, that the plaintiff could not recover in strict liability or negligence for the cost of repairing a defective truck or for business income lost because the truck could not make deliveries. “Even in actions for negligence,” we wrote, “a manufacturer’s liability is limited to damages for physical injuries and there is no recovery for economic loss alone.” (Id. at p. 18, 45 Cal.Rptr. 17, 403 P.2d 145.) Plaintiffs argue that this statement, and Seely’s other observations about damages for negligence, were dictum because the court actually upheld, on a breach of express warranty theory, an award of damages representing the purchase price of the truck and lost profits. (Id. at p. 13, 45 Cal.Rptr. 17, 403 P.2d 145.) Indeed, the statement can be seen either as dictum or as part of the court’s rationale for permitting the Seely plaintiff to recover his economic losses in warranty rather than in tort. Which label we attach to the statement is of no consequence. This is because the principle articulated in Seely has by critical examination and application in subsequent cases been confirmed as law. Courts routinely apply Seely in strict liability and negligence cases alike to distinguish recoverable damages for physical injury from unrecoverable damages representing the benefit of a contractual bargain.

    In Zamora v. Shell Oil Co. (1997) 55 Cal.App.4th 204, 208-211, 63 Cal.Rptr.2d 762,for example, homeowners were not allowed to recover in negligence or strict liability for the cost of replacing water pipes known to be defective, but which had not yet leaked. In Fieldstone v. Briggs Plumbing Products, Inc. (1997) 54 Cal. App.4th 357, 363-367, 62 Cal.Rptr.2d 701, a strict liability general contractor was not awarded the cost of replacing installed sinks that rusted and chipped prematurely, because no other property had been damaged. In San Francisco Unified School Dist. v. W.R. Grace & Co. (1995) 37 Cal.App.4th 1318, 1327-1330, 44 Cal.Rptr.2d 305, a public school district could not state a cause of action in negligence or strict liability based on the presence of asbestos products in its buildings, when the products had not contaminated 728*728 the buildings by releasing friable asbestos. In Sacramento Regional Transit Dist. v. Grumman Flxible (1984) 158 Cal.App.3d 289, 293-298, 204 Cal.Rptr. 736, the court held a transportation district could not recover in negligence or strict liability for the cost of repairing defective bus parts that had not caused further damage. “We believe,” the court explained, that “the line between physical injury to property and economic loss reflects the line of demarcation between tort theory and contract theory.” (Id at p. 294, 204 Cal.Rptr. 736.) As one final example, significant because of its similarity to the case before us, the court in Casey v. Overhead Door Corp., supra, 74 Cal.App.4th 112, 123-124, 87 Cal.Rptr.2d 603, a negligence case based on defective windows in mass-produced housing, relied onSeely, supra, 63 Cal.2d 9, 45 Cal.Rptr. 17, 403 P.2d 145, to uphold an order excluding testimony about damages representing the cost to replace defective windows that had not caused property damage and a nonsuit based on that order. “A consumer,” the court explained, “may not recover economic loss damages against the manufacturer of a defective product in a cause of action for strict liability or negligence. (Seely supra, at p.] 18 [45 Cal.Rptr. 17, 403 P.2d 145]) [¶] Since plaintiffs could not recover economic losses [i.e., the cost of repairing and replacing the defective windows], testimony on that item of damages would have been irrelevant.” (Casey v. Overhead Door Corp., at p. 123, 87 Cal.Rptr.2d 603.)

    Over time, the concept of recoverable physical injury or property damage expanded to include damage to one part of a product caused by another, defective part. Examples include cases in which poorly prepared lots subsided, damaging the houses built thereon (Stearman v. Centex Homes, supra, 78 Cal.App.4th 611, 615, 616-623, 92 Cal.Rptr.2d 761), in which defective bottle caps ruined wine (International Knights of Wine, Inc. v. Ball Corp. (1980) 110 Cal.App.3d 1001, 1003-1005, 168 Cal.Rptr. 301 (lead opn. of Roth, P.J.); see also id. at p. 1008, 168 Cal.Rptr. 301 (conc. opn. of Fleming, J.)), and in which an unknown defect in an engine compartment started a fire that destroyed the entire automobile (Gherna v. Ford Motor Co. (1966) 246 Cal.App.2d 639, 644, 649-651, 55 Cal.Rptr. 94). Indeed, the decision in Seely, supra, 63 Cal.2d 9, 45 Cal.Rptr. 17, 403 P.2d 145, suggested these results by intimating that further damage to a truck caused by a manufacturing defect might be recoverable in strict liability or negligence, even though the cost of repairing the original defect was not. (Id. at p. 19, 45 Cal. Rptr. 17, 403 P.2d 145; see generally Stearman v. Centex Homes, at pp. 616-623, 92 Cal.Rptr.2d 761[extensively discussing the point].)

    Plaintiffs argue no requirement of property damage exists, at least in the context of residential construction. The cases discussed above do not support the argument. They go only so far as to hold that property damage compensable in tort can exist when a defective component damages other parts of the same product. Plaintiffs attempt to find a more favorable rule in the two older cases noted above, Stewart, supra, 55 Cal.2d 857, 13 Cal.Rptr. 521, 362 P.2d 345, and Sabella, supra, 59 Cal.2d 21, 27 Cal.Rptr. 689, 377 P.2d 889. (See ante, 101 Cal.Rptr.2d at p. 725, 12 P.3d at p. 1131 et seq.) Those cases, however, do not establish the rule plaintiffs seek. We held in Stewart that the plaintiff homeowners could recover from a subcontractor for damages to their house and lot caused by water escaping from a negligently built swimming pool. (Stewart, at p. 860, 13 Cal.Rptr. 521, 362 P.2d 345.) No question was presented of a defect without resulting property damage. Likewise, Sabellaconcerned a house damaged by the subsidence of an improperly compacted lot. (Sabella, at pp. 23-27, 27 Cal.Rptr. 689, 377 P.2d 889.) Today, after Seely, supra, 63 Cal.2d 9, 45 Cal.Rptr. 17, 403 P.2d 145, the plaintiffs in those cases would argue that defective components of the property (in Stewart the concrete in the swimming pool, and in Sabella the lot) had damaged 729*729 other components, including the houses. (See, e.g., Stearman v. Centex Homes, supra, 78 Cal.App.4th 611, 622-623, 92 Cal. Rptr.2d 761.) Because Stewart and Sabella clearly involved property damage, we find nothing in those decisions to cast doubt on the requirement of property damage later articulated in Seely and the many cases following Seely. (See ante, 101 Cal.Rptr.2d at p. 726, 12 P.3d at p. 1132, et seq.)[10]

    Plaintiffs also contend the court in Seely, supra, 63 Cal.2d 9, 45 Cal.Rptr. 17, 403 P.2d 145, was concerned exclusively with commercial losses or lost business profits, rather than economic losses in a broader sense. To the contrary, the court inSeely was unmistakably concerned not just with lost profits but also with the fundamental difference between, on the one hand, the consumer’s contractual interest in having a product of the expected, bargained-for value and quality, and, on the other hand, the consumer’s tort interest in not suffering property damage or personal injury due to negligence in the manufacturing process. Chief Justice Traynor could not have articulated the point more clearly: “A consumer should not be charged at the will of the manufacturer with bearing the risk of physical injury when he buys a product on the market. He can, however, be fairly charged with the risk that the product will not match his economic expectations unless the manufacturer agrees that it will. Even in actions for negligence, a manufacturer’s liability is limited to damages for physical injuries and there is no recovery for economic loss alone.” (Id at p. 18, 45 Cal.Rptr. 17, 403 P.2d 145.) Certainly the opinion also speaks of the manufacturer not being “held for the level of performance of his products in the consumer’s business unless he agrees that the product was designed to meet the consumer’s demands.” (Ibid., italics added.) After all, the immediate factual context of the case before the court included a claim for lost profits. (Id at p. 13, 45 Cal.Rptr. 17, 403 P.2d 145.) But to read this court’s seminal decision in Seely as speaking only to claims for lost profits, and not more generally to the distinction between tort and contract, is to mistake the particular application for the governing principle.

    An uncertain number of plaintiffs purchased their houses directly from defendant Lyon. As to these plaintiffs, it is argued, privity of contract offers an additional reason for rejecting any requirement of property damage in an action for negligence based on construction defects. It has been said that “[a] contract to perform services gives rise to a duty of care which requires that such services be performed in a competent and reasonable manner” and that “[a] negligent failure to do so may be both a breach of contract and a tort.” (North American Chemical Co. v. Superior Court (1997) 59 Cal.App.4th 764, 774, 69 Cal.Rptr.2d 466.) Therefore, plaintiffs argue, defendant Lyon’s negligent breach of contractual duties owed directly to plaintiffs to deliver homes in compliance with the applicable building codes is a tort, for which plaintiffs may recover “the amount which will compensate for all the detriment proximately caused thereby….” (Civ.Code, § 3333.)

    The argument is not persuasive. A person may not ordinarily recover in tort for the breach of duties that merely restate contractual obligations. Instead, “`[c]ourts will generally enforce the breach of a contractual promise through contract 730*730 law, except when the actions that constitute the breach violate a social policy that merits the imposition of tort remedies.'” (Erlich v. Menezes, supra, 21 Cal.4th 543, 552, 87 Cal.Rptr.2d 886, 981 P.2d 978, quoting Freeman & Mills, Inc. v. Belcher Oil Co., supra, 11 Cal.4th 85, 107, 44 Cal. Rptr.2d 420, 900 P.2d 669 (cone. & dis. opn. of Mosk, J.).) This court recently rejected the argument that the negligent performance of a construction contract, without more, justifies an award of tort damages. (Erlich v. Menezes at pp. 550-554, 87 Cal.Rptr.2d 886, 981 P.2d 978 [reversing an award of damages for emotional distress for negligent construction].) In so doing, however, we reiterated that conduct amounting to a breach of contract becomes tortious when it also violates a duty independent of the contract arising from principles of tort law. (Id.at p. 551, 87 Cal. Rptr.2d 886, 981 P.2d 978.) The strict liability and negligence cases discussed above, which hold the builders of homes liable for construction defects causing property damage, may be understood as recognizing such an independent duty. But that duty is limited by the rule in Seely, supra, 63 Cal.2d 9, 18, 45 Cal.Rptr. 17, 403 P.2d 145, which bars recovery of economic damages representing the lost benefit of a bargain.

    We noted earlier that the law of construction defects after Sabella, supra, 59 Cal.2d 21, 27 Cal.Rptr. 689, 377 P.2d 889, diverged into two theories: strict products liability, which we have discussed, and the tort recognized in J’Aire, supra, 24 Cal.3d 799, 157 Cal.Rptr. 407, 598 P.2d 60. Apart from the arguments that Seely, supra, 63 Cal.2d 9, 45 Cal.Rptr. 17, 403 P.2d 145, does not apply to negligent construction (see ante, 101 Cal.Rptr.2d at pp. 728-729, 12 P.3d at pp. 1134-1135) and that plaintiffs in privity may recover tort damages for breach of contract (see ante, at p. 729, 12 P.3d at p. 1135), plaintiffs base their claim exclusively on J’Aire and cases following that decision.

    J’Aire, supra, 24 Cal.3d 799, 157 Cal. Rptr, 407, 598 P.2d 60, as mentioned, relied on this court’s 1958 decision in Biakanja, supra, 49 Cal.2d 647, 320 P.2d 16. InBiakanja, we held that a defendant’s negligent performance of a contractual obligation resulting in damage to the property or economic interests of a person not in privity could support recovery if the defendant was under a duty to protect those interests. The court articulated a case-by-case test for identifying such a duty. “The determination whether in a specific case the defendant will be held liable to a third person not in privity,” we wrote, “is a matter of policy and involves the balancing of various factors….” (Biakanja, at p. 650, 320 P.2d 16.) The six factors were: “[1] the extent to which the transaction was intended to affect the plaintiff, [2] the foreseeability of harm to him, [3] the degree of certainty that the plaintiff suffered injury, [4] the closeness of the connection between the defendant’s conduct and the injury suffered, [5] the moral blame attached to the defendant’s conduct, and [6] the policy of preventing future harm.” (Ibid.) In concluding the defendant notary owed a duty to an intended beneficiary not to mishandle the will’s drafting and solemnization, we attached particular importance to the fact that the “`end and aim'” of the notary’s service to the testator was “to provide for the passing of [the] estate to [the] plaintiff (ibid.), and to the high impropriety of, and need to prevent, the unlicensed practice of law (id. at p. 651, 320 P.2d 16).

    Twenty-one years later, the court in J’Aire, supra, 24 Cal.3d 799, 157 Cal. Rptr. 407, 598 P.2d 60, applied the Biakanja (supra, 49 Cal.2d 647, 650, 320 P.2d 16) factors to conclude that the tenant of a building used as a restaurant could state a cause of action for negligence against a renovation contractor hired by the building’s owner for business income lost when the contractor “fail[ed] to complete the project with due diligence.” (J’Aire, at pp. 802, 804-805, 157 Cal.Rptr. 731*731 407, 598 P.2d 60.) Applying the Biakanja factors, the court held that a “special relationship” (J’Aire, at p. 804, 157 Cal. Rptr. 407, 598 P.2d 60) permitting recovery of economic losses (i.e., the relationship defined by the Biakanja test) existed between the contractor and the tenant. The court dismissed concerns that such a theory of recovery would threaten liability, out of proportion to fault, for remote consequences and speculative damages. (J’Aire, at pp. 807-808, 157 Cal.Rptr. 407, 598 P.2d 60.) In the court’sview, the Biakanja factors, in combination with “ordinary principles of tort law such as proximate cause,” were “fully adequate to limit recovery” of purely economic damages “without the drastic consequence of an absolute rule which bars recovery in all such cases.” (J’Aire, at p. 808, 157 Cal. Rptr. 407, 598 P.2d 60.)

    The lower courts have applied the theory of liability articulated in J’Aire, supra, 24 Cal.3d 799, 157 Cal.Rptr. 407, 598 P.2d 60, in a wide variety of cases. To mention just a few, courts have relied on J’Aire to assess a chemical manufacturer’s claim against a transportation company for business losses caused by the contamination of its product in shipment (North American Chemical Co. v. Superior Court, supra,59 Cal.App.4th 764, 781-785, 69 Cal.Rptr.2d 466); a dairy’s claim against the manufacturer of an allegedly defective milking machine for lost profits and property damage (Ott v. Alfa-Laval Agri, Inc. (1995) 31 Cal.App.4th 1439, 1448-1457, 37 Cal. Rptr.2d 790); a construction lender/mortgagee’s claim against a builder for construction defects (Sumitomo Bank v. Taurus Developers, Inc., supra, 185 Cal. App.3d 211, 223-226, 229 Cal.Rptr. 719); an abalone packer’s claim for lost profits against the manufacturer of unusable cans (Ales-Peratis Foods Internat, Inc. v. American Can Co. (1985) 164 Cal.App.3d 277, 284-290, 209 Cal.Rptr. 917); and real estate investors’ claims for the cost of repairing construction defects in an apartment building (Huang v. Garner, supra, 157 Cal.App.3d 404, 422-425, 203 Cal.Rptr. 800; see post, 101 Cal.Rptr.2d at p. 734, 12 P.3d at p. 1139 et seq.).

    The lower courts have also expanded upon J’Aire, supra, 24 Cal.3d 799, 157 Cal.Rptr. 407, 598 P.2d 60. While the court in J’Aire purported only to address duties owed to persons not in contractual privity with the defendant (id. at p. 804, 157 Cal.Rptr. 407, 598 P.2d 60), courts subsequently have applied J’Aire to cases in which privity did exist. These courts have concluded that “the reasoning of J’Aire is wholly incompatible with a limitation of the cause of action to those instances in which the plaintiff and defendant are not in privity….” (Ott v. Alfa-Laval Agri, Inc., supra, 31 Cal.App.4th 1439, 1448, 37 Cal.Rptr.2d 790; see also North American Chemical Co. v. Superior Court, supra, 59 Cal.App.4th 764, 783, 69 Cal. Rptr.2d 466; Pisano v. American Leasing (1983) 146 Cal.App.3d 194, 197, 194 Cal. Rptr. 77[both applying J’Aire in cases apparently involving privity].)

    Plaintiffs contend that J’Aire, supra, 24 Cal.3d 799, 157 Cal.Rptr. 407, 598 P.2d 60,when it applies, displaces the general rule (Seely, supra, 63 Cal.2d 9, 18, 45 Cal.Rptr. 17, 403 P.2d 145) that damages are not recoverable for product defects that have not caused property damage.[11] Plaintiffs base the contention on the following statement in J’Aire: “Where the risk of harm is foreseeable, … an injury to the plaintiffs 732*732 economic interests should not go uncompensated merely because it was unaccompanied by any injury to his person or property.” (J’Aire, at p. 805, 157 Cal. Rptr. 407, 598 P.2d 60.) The validity of the orders on review depends largely on the significance of that statement. Paraphrasing it, one might ask the dispositive question this way: Does the law of negligence protect plaintiffs’ economic interests in having houses that fully comply with the building codes, measured by the cost of repairs or diminished value associated with noncompliance, even though the asserted harm to those interests is unaccompanied by any injury to person or property?

    To apply the multifactored balancing test set out in J’Aire, supra, 24 Cal.3d 799, 804, 157 Cal.Rptr. 407, 598 P.2d 60, tends to involve a court in making fairly subjective judgments. In this case, however, a relatively objective obstacle to plaintiffs’ claim appears in factor (3), which looks to “the degree of certainty that the plaintiff suffered injury….” (Ibid.) Construction defects that have not ripened into property damage, or at least into involuntary out-of-pocket losses, do not comfortably fit the definition of “`appreciable harm'”—an essential element of a negligence claim. (Dairies v. Krasna(1975) 14 Cal.3d 502, 513, 121 Cal.Rptr. 705, 535 P.2d 1161; see San Francisco Unified School Dist. v. W.R. Grace & Co., supra, 37 Cal.App.4th 1318, 1327-1331, 44 Cal. Rptr.2d 305 [the presence of asbestos products in buildings did not, prior to the release of friable asbestos, constitute actual and appreciable harm under Davies v. Krasna]; Zamora v. Shell Oil Co., supra, 55 Cal.App.4th 204, 208-211, 63 Cal. Rptr.2d 762 [finding no cognizable damage in the cost of replacing defective pipes that had not yet leaked].) The breach of a duty causing only speculative harm or the threat of future harm does not normally suffice to create a cause of action. (Davies v. Krasna, at p. 513, 121 Cal.Rptr. 705, 535 P.2d 1161.) For the same reason—because the physical harm traditionally compensable in tort is lacking—to ask in the words of factor (2) whether the harm to plaintiffs was “foreseeable]” (J’Aire, at p. 804,157 Cal.Rptr. 407, 598 P.2d 60) simply begs the question: What harm?

    Plaintiffs argue that the cost of repairs is an accepted measure of damage for construction defects and that plaintiffs could make the cost of repairs certain within the meaning of J’Aire, supra, 24 Cal.3d 799, 804, 157 Cal.Rptr. 407, 598 P.2d 60, by voluntarily repairing defects and obtaining a receipt for money spent. This confuses the measurement of alleged damages with the ability of particular facts to support a tort action. To say that one’s house needs repairs costing a certain amount is not necessarily to say that one has suffered the type of harm cognizable in tort, as opposed to contract. Plaintiffs also argue that “the degree of certainty that the plaintiff suffered injury” (ibid.) is merely a factor to be balanced with the other factors set out in J’Aire for determining a person’s liability for negligently injuring another’s economic interests. We do not believe, however, that the J’Aire court intended to dispense with the rule that appreciable, nonspeculative, present injury is an essential element of a tort cause of action. (Davies v. Krasna, supra, 14 Cal.3d 502, 513, 121 Cal.Rptr. 705, 535 P.2d 1161; cf. Romano v. Rockwell Internal, Inc. (1996) 14 Cal.4th 479, 500-503, 59 Cal.Rptr.2d 20, 926 P.2d 1114 [plaintiff suffered appreciable harm sufficient to support a tort claim for wrongful discharge upon actual termination rather than upon prospective notification].) Lacking that fundamental prerequisite to a tort claim, it is difficult to imagine what other factors, singly or in combination, might justify the court in finding liability.

    Turning to the other factors, we find no adequate justification. We may assume for argument’s sake that the conduct of a person engaged in construction is “intended to affect” all foreseeable purchasers of the property. (J’Aire, supra, 24 Cal.3d 799, 804, 157 Cal.Rptr. 407, 598 P.2d 60 733*733 [factor (1)]; see also Sumitomo Bank v. Taurus Developers, Inc., supra, 185 Cal. App.3d 211, 224, 229 Cal.Rptr. 719; Huang v. Garner, supra, 157 Cal.App.3d 404, 423-424, 203 Cal.Rptr. 800; Cooper v. Jevne, supra, 56 Cal.App.3d 860, 869, 128 Cal.Rptr. 724.) We may also assume that a sufficiently “close[ ] connection [exists] between … defendant’s conduct” and the alleged defects. (J’Aire, at p. 804, 157 Cal.Rptr. 407, 598 P.2d 60 [factor (4)].) Also, while some “moral blame” arguably “attach[es]” to many deviations from the building codes (ibid, [factor (5)]), the degree of blame would appear to depend upon the nature of the deviation. Thus, even if significant moral blame inheres in negligent construction creating a risk of likely structural failure leading to a notice of abatement (Huang v. Garner, at p. 424 & fn. 13, 203 Cal.Rptr. 800), we may still reasonably assign reduced moral blame to less serious defects not presenting that degree of risk, and to such flaws as doors that are out of plumb, discolored drain stoppers, and inoperable garbage disposals, to take a few examples from this case. Factor (6), the last factor, looks to “the policy of preventing future harm.” (J’Aire, at p. 804, 157 Cal.Rptr. 407, 598 P.2d 60.) Certainly, as plaintiff in Provencal noted in its offer of proof, the express purpose of the building codes is to “provide minimum standards to safeguard life or limb, health, property and public welfare….” (U. Bldg.Code, § 102, Cal.Code Regs., tit, 24, former § 2-102.) Plaintiffs have not shown, however, that any of the alleged defects actually poses a serious risk of harm to person or property. To say, as plaintiffs do, that the purpose, of construction standards for shear walls is to “minimize property damage and personal injury in the event of seismic and wind forces,” is not to say that any given defect is sufficiently grave to pose a realistic risk of structural failure. In conclusion, applying the J’Aire factors, we do not find they justify a broad rule permitting recovery of repair costs unaccompanied by property damage or personal injury.

    Plaintiffs contend precedent requires a different result. “[E]very reported decision applying the J’Aire[, supra, 24 Cal.3d 799, 804, 157 Cal.Rptr. 407, 598 P.2d 60] factors to residential construction,” they argue, “has allowed the recovery of economic loss,” meaning, in this context, the cost of repairing defects that have not caused property damage. The decisions plaintiffs cite, however, do not strongly support their position. The courts in Sumitomo Bank v. Taurus Developers, Inc., supra, 185 Cal.App.3d 211, 229 Cal. Rptr. 719, and Cooper v. Jevne, supra, 56 Cal.App.3d 860, 128 Cal.Rptr. 724 (which predated J’Aire and relied on Biakanja, supra, 49 Cal.2d 647, 320 P.2d 16), simply held that the plaintiffs in those cases had stated causes of action and, thus, reversed judgments of dismissal entered after demurrers were erroneously sustained. The court in Sumitomo Bank v. Taurus Developers, Inc., did not address the distinction between economic damages and physical harm; no such issue was raised. The court in Cooper v. Jevne held that the plaintiff homeowners had stated a cause of action in negligence against the architects of their houses, with whom the plaintiffs were not in privity. As damages for their negligence cause of action, the plaintiffs sought the cost of repairs, compensation for lost use and income, and “[p]ast and future damage to personal property,” among other things. (Cooper v. Jevne, supra, 56 Cal.App.3d at p. 867, fn. 2, 128 Cal.Rptr. 724.) That the plaintiffs had stated a cause of action was established by the architects’ concession that their professional liability to the plaintiffs not in privity of contract with them extended to property damage. (Id. at p. 868, fn. 3, 128 Cal.Rptr. 724.) For this reason, and because the question was not before the courton demurrer, the court’s conclusion that Seely’s economic loss rule does not apply to professional negligence claims (Cooper v. Jevne, at p. 869, 128 Cal.Rptr. 724) is dictum. The court, in any event, acknowledged Seely’s continuing relevance 734*734 to the liability of a manufacturer for product defects. (Cooper v. Jevne, at p. 868, 128 Cal.Rptr. 724.) Furthermore, unlike the judgments of dismissal on appeal inSumitomo Bank v. Taurus Developers, Inc., and Cooper v. Jevne, the instant rulings in limine do not preclude plaintiffs from presenting to the trier of fact whatever claims for property damage may exist.[12]

    Plaintiffs place particular emphasis on Huang v. Garner, supra, 157 Cal.App.3d 404, 203 Cal.Rptr. 800 (Huang). The court in that case relied on J’Aire, supra, 24 Cal.3d 799, 157’Cal.Rptr. 407, 598 P.2d 60, to reverse a nonsuit for the defendants (a developer and a contractor) on the plaintiff real estate investors’ claims for the cost of repairing defects in an apartment building. Some of the alleged defects had caused property damage, and some had not. (Huang, at pp. 419-425, 203 Cal.Rptr. 800.) The Huang court found the “certainty” of injury required by J’Aire (at p. 804, 157 Cal.Rptr. 407, 598 P.2d 60) in plaintiffs’ duty to comply with a notice of abatement citing likely structural failure and requiring specific repairs. (Huang, at p. 424 & fn. 13,203 Cal.Rptr. 800.) Yet Huang’s analysis is not entirely satisfactory because other alleged construction defects in that case had neither caused property damage nor been cited in the notice of abatement. (Compare id. at pp. 419-420, 203 Cal.Rptr. 800[summary of alleged defects] with id. at p. 424, fn. 13, 203 Cal.Rptr. 800 [order of abatement].) Even accepting for the sake of argument the Huang court’s suggestion that a notice of abatement might suffice to convert repair costs into tort damages, the decision offers no adequate explanation for permitting the plaintiffs, consistently withSeely, supra, 63 Cal.2d 9, 45 Cal.Rptr. 17, 403 P.2d 145, to recover repair costs for the other defects that had neither appeared in the notice nor resulted in property damage. Accordingly, we disapprove Huang to the extent it is inconsistent with the views set out in this opinion.

    Whether viewed as part of the test set out in J’Aire, supra, 24 Cal.3d 799, 804, 157 Cal.Rptr. 407, 598 P.2d 60, or as an independent argument for extending tort liability, the “policy of preventing future harm” (ibid, [factor (6)]) is probably plaintiffs’ strongest argument. In some sense, 735*735 that policy might be served by a rule of tort liability making builders, in effect, the insurers of building code compliance, even as to defects that have not caused property damage or personal injury. Moreover, as plaintiffs argue, to require builders to pay to correct defects as soon as they are detected rather than after property damage or personal injury has occurred might be less expensive. On the other hand, such a rule would likely increase the cost of housing by an unforeseeable amount as builders raised prices to cover the increased risk of liability. Such a rule should also be unnecessary to the extent buyers timely enforce their contract, warranty and inspection rights, and to the extent building authorities vigorously enforce the applicable codes for new construction.

    The Chief Justice, in his concurring and dissenting opinion, proposes to resolve these conflicting policy considerations with a complex new rule of tort liability (1) barring recovery for minor defects and building code violations that have not caused personal injury or property damage; (2) permitting recovery for serious defects and code violations posing a significant risk of death, personal injury, or considerable property damage; and (3) requiring court-supervised disbursement of all damages awarded to ensure that repairs are actually made. (Cone. & dis. opn. of George, C.J.,post, 101 Cal.Rptr.2d at pp. 738, 751, 752, 12 P.3d at pp. 1143, 1154, 1155.)

    The proposal entails serious difficulties. First among these is that the Chief Justice, while asserting that our holding “offends … established common law” (cone. & dis. opn. of George, C.J., post, 101 Cal. Rptr.2d at p. 738, 12 P.3d at p. 1143), nevertheless “agree[s] with the majority to the extent it declines to allow recovery in [negligence for the cost of repairing construction defects that pose no significant risk of serious personal injury or property damage” (id. at p. 752, 12 P.3d at p. 1155). As we have explained, whether the economic loss rule applies depends on whether property damage has occurred rather than on the possible gravity of damages that have not yet occurred. While the Chief Justice rejects our understanding of the economic loss rule, his concurring and dissenting opinion offers no other rationale for denying recovery for minor defects. Although the Chief Justice advances policy considerations to justify providing recovery for serious defects, his narrow conception of the economic loss rule as applicable only to commercial losses (cone. & dis. opn. of George, C.J., post, at pp. 740-741, 12 P.3d at pp. 1145-1146; but see this opn., ante, at pp. 728-729, 12 P.3d at pp. 1134-1135) would seem to compel thecourt to permit recovery for minor defects, as well. In short, the proposed rule lacks coherence.

    The Legislature, whose lawmaking power is not encumbered by precedent, is free to adopt a rule like that proposed in the Chief Justice’s concurring and dissenting opinion. Yet even if the proposed rule could plausibly be defended as a logical development of the common law, and thus appropriate for judicial rather than legislative promulgation, the rule’s shortcomings would counsel its rejection. The distinction between serious and minor defects has a superficial theoretical appeal that evaporates in practice. Amicus curiae Structural Engineers Association of California, which supports plaintiffs’ position in this court, aptly demonstrates that almost any building code violation can, under the right set of assumptions and circumstances, be considered serious.[13] 736*736 “[T]here is no mechanism at this level to separate life safety defects from cosmetic defects,” amicus curiae argues; such questions, in its view, are “better left to the trier of fact after a complete presentation of expert testimony on both sides.” If experts claim to be unable before trial to rule out any building code violations as trivial, then a rule looking to the potential seriousness of possible property damage, rather than the existence of actual damage, is very likely to frustrate the pretrial disposition of claims based on trivial defects. Such a rule, by forcing judges to attempt to predict the likelihood that any given defect will cause property damage and, if so, its likely seriousness, will make it difficult for them to screen out trivial claims as a matter of law. Because, moreover, the rule invites a speculative inquiry, any pretrial dispositions based thereon are likely to be inconsistent[14] and challenged on appeal. In short, the practical effect of a rule permitting recovery for “serious” defects only, however well intentioned, would likely be to insulate from demurrer and summary judgment virtually all complaints containing allegations of building code violations.

    The Chief Justice’s suggestion that courts should supervise the disbursement of tort damages (cone. & dis. opn. of George, C.J., post, 101 Cal.Rptr.2d at pp. 745, 753, 12 P.3d at pp. 1149, 1156) highlights a final difficulty with the rule he proposes. Ordinarily, nothing compels a successful plaintiff to spend money recovered in construction defect litigation on repairs. Indeed, plaintiffs in Aas expressly seek in their complaint, in addition to the cost of repairs, damages representing the “diminution in value” of their residences.[15] The possibility that tort dam 737*737 ages will not actually be spent on repairs, defendants contend, weakens the argument that imposing liability for construction defects without resulting damage will serve the policy goal of improving the state’s housing stock. The rule the Chief Justice proposes would address this concern by requiring court-supervised disbursement of all damages awarded to ensure that repairs are actually made. (Cone. & dis. opn. of George, C.J., 101 Cal.Rptr.2d at p. 753, 12 P.3d at p. 1156.) Again, while such a rule might be appropriate as legislation, to reconcile it with the traditional role of the judiciary is very difficult, indeed. While there have been exceptions, courts do not ordinarily tell successful plaintiffs how to spend their tort recoveries.[16] That judicial control over the proceeds might be necessary to render the proposed liability rule fair suggests the rule tries the limits of our power to expound the common law.

    In our view, the many considerations of social policy this case implicates, rather than justifying the imposition of liability for construction defects that have not caused harm of the sort traditionally compensable in tort (Seely, supra, 63 Cal.2d 9, 18, 45 Cal.Rptr. 17, 403 P.2d 145), serve instead to emphasize that certain choices are better left to the Legislature. That body has at its disposal a wider range of options and superior access to information about the social costs and benefits of each. “Legislatures, in making such policy decisions, have the ability to gather empirical evidence, solicit the advice of experts, and hold hearings at which all interested parties may present evidence and express their views….” (Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 694, fn. 31, 254 Cal.Rptr. 211, 765 P.2d 373; see alsoMoore v. Regents of University of California (1990) 51 Cal.3d 120, 147, 271 Cal.Rptr. 146, 793 P.2d 479.)[17]

    Home buyers in California already enjoy protection under contract and warranty law for enforcement of builders’ and sellers’ obligations; under the law of negligence and strict liability for acts and omissions that cause property damage or personal injury; under the law of fraud for misrepresentations about the property’s condition; and an exceptionally long 10-year statute of limitations for latent construction defects (Code Civ.Proc, § 337.15). While the Legislature may add 738*738 whatever additional protections it deems appropriate, the facts of this case do not present a sufficiently compelling reason to preempt the legislative process with a judicially created rule of tort liability.

    III. Disposition

    The judgment of the Court of Appeal is affirmed.

    KENNARD, J., BAXTER, J., CHIN, J., and BROWN, J., concur.

    Concurring and Dissenting Opinion by GEORGE C.J.

    Other courts faced with the question we address today have asked: Why should a homeowner have to wait for a personal tragedy to occur in order to recover damages to repair known serious building code safety defects caused by negligent construction? (E.g., Council of Co-Owners v. Whiting Turner (Md.1986) 308 Md. 18, 517 A.2d 336, 345.) Perhaps because those courts have addressed the matter from such a commonsense perspective, they have reached conclusions very different from that adopted by the majority in the present case. In determining that a negligently constructed home must first collapse or be gutted by fire before a homeowner may sue in tort to collect costs necessary to repair negligently constructed shear walls or fire walls, the majority today embraces a ruling that offends both established common law and basic common sense.

    In this case, we must decide whether, under California law, when a building contractor has breached its duty of care by constructing a home that violates significant building safety code provisions that are designed to protect health and safety, and the homeowner has discovered these safety code violations before a personal injury has occurred or before the home has suffered any physical property damage, the homeowner, in a negligence action, may recover those costs of repair that a reasonably prudent homeowner would incur under the circumstances, or whether the “economic loss” rule of Seely v. White Motor Co. (1965) 63 Cal.2d 9, 45 Cal.Rptr. 17, 403 P.2d 145 (Seely)—a rule designed to limit recovery of such business-related losses as lost profits or lost commercial opportunities—bars a homeowner from recovering such repair costs in a negligence action.

    I agree with the majority that many if not most of the defects listed in the underlying complaints—items such as “discolored drain stoppers, and inoperable garbage disposals” (maj. opn., ante, 101 Cal. Rptr.2d at p. 733, 12 P.3d at p. 1138)—do not pose a risk of personal injury or property damage sufficient to warrant recognition of a right to recover repair costs in negligence, and hence to this extent I concur in the judgment. At the same time, however, I conclude, consistent with California authority and with the courts of other jurisdictions, that a homeowner may maintain a cause of action in negligence to recover the costs of correcting the most significant building safety code violations conceded in this litigation (e.g., shear walls that were improperly constructed or fastened and that put the structure at risk of Collapse during high winds or an earthquake; improperly constructed fire walls that would allow a fire to spread rapidly from one part of the structure to another), but that have not yet manifested themselves in physical damage to the property or resulted in personal injury. To the extent the majority bars such recovery, I dissent. Recognizing a right to recover costs to repair the serious safety defects here at issue—defects that pose a risk of serious personal injury or considerable property damage—would not require us to break new ground; all of the established factors traditionally used to assess building defect cases militate strongly in favor of such relief. And allowing such limited recovery also best comports with rational economic policy, as well as common sense: It obviously is preferable to pay a relatively few dollars at an early date to correct a serious safety risk that may cost millions 739*739 or billions of dollars to redress if the inhabitants of dwellings are forced to wait for disaster to strike and for death, personal injury, or physical property damage to ensue.

    I.

    A.

    In Connor v. Great Western Sav. & Loan Assn. (1968) 69 Cal.2d 850, 73 Cal. Rptr. 369, 447 P.2d 609 (Connor), Chief Justice Roger Traynor, upholding a negligence action by homeowners against a lending institution that had financially backed and extensively controlled a new housing development, observed that “the usual buyer of a home is ill-equipped with experience or financial means to discern … structural defects.” (Id., at p. 867, 73 Cal.Rptr. 369, 447 P.2d 609.) The Connor opinion rejected as “conjectural claims” assertions that recognizing a duty on the part of the defendant to the homeowners would “increase housing costs, drive marginal builders out of business, and decrease total housing at a time of great need” (ibid.), observing that “[i]n any event, there is no enduring social utility in fostering the construction of seriously defective homes. If reliable construction is the norm, the recognition of a duty on the part of tract financiers to home buyers should not materially increase the cost of housing or drive small builders out of business.” (Id., at pp. 867-868, 73 Cal.Rptr. 369, 447 P.2d 609, fn. omitted.) Finally, the court observed in Connor that “a home is not only a major investment for the usual buyer but also the only shelter he has. Hence it becomes doubly important to protect him against structural defects that could prove beyond his capacity to remedy.” (Id., at p. 867, 73 Cal.Rptr. 369, 447 P.2d 609, italics added.)

    As implied in the above italicized observation, tort law offers the most effective, and often the only realistic, nonstatutory remedy for consumers in this area. Although technically available to at least some of the plaintiffs in this and similar litigation, contract or warranty claims in this setting are difficult to prove and to enforce, and our decisions have recognized that problems with privity, disclaimers inserted into contracts by developers or contractors, and notice requirements, often frustrate the ability to recover on contract or warranty theories. (See, e.g., Greenman v. Yuba Power Products, Inc. (1963) 59 Cal.2d 57, 61, 27 Cal.Rptr. 697, 377 P.2d 897 [notice requirement under implied warranty is a “`booby-trap for the unwary'” and “`consumers are] seldom “steeped in the business practice which justifies the rule”‘”];Anthony v. Kelsey-Hayes Co. (1972) 25 Cal.App.3d 442, 448, 102 Cal.Rptr. 113[lack of privity defeats implied warranty claim].) As observed in Kriegler v. Eichler Homes, Inc. (1969) 269 Cal.App.2d 224, 228, 74 Cal.Rptr. 749 (Kriegler ), because the purchaser of a “`development house'” “`has no real competency to inspect on his own, his actual examination is, in the nature of things, largely superficial, and his opportunity for obtaining meaningful protective changes in the conveyancing documents prepared by the builder vendor is negligible….’ [¶] `Buyers of mass produced development homes are not on an equal footing with the builder vendors and are no more able to protect themselves in the deed than are automobile purchasers in a position to protect themselves in the bill of sale.'” Accordingly, as Chief Justice Traynor recognized in Connor, supra, 69 Cal.2d 850, 73 Cal.Rptr. 369, 447 P.2d 609, the inadequacy of contract and warranty law properly should inform our consideration of the role and use of tort law in this context. (Cf. Kaiser Steel Corp. v. Westinghouse Elec. Corp. (1976) 55 Cal.App.3d 737, 747-748, 127 Cal.Rptr. 838.)

    B.

    As the majority observes, the author of Connor’s rousing confirmation of the right of homeowners to sue in negligence in 740*740 order to remedy negligent construction also authored the majority opinion in Seely, supra, 63 Cal.2d 9, 45 Cal.Rptr. 17, 403 P.2d 145—a decision that concerned not an action in negligence for repair of serious construction defects in residential housing, but, instead, an action under warranty and strict products liability for lost business profits arising from an assertedly defective commercial truck. The majority asserts that dictum in Seely, to the effect that “[e]ven in actions for negligence, a manufacturer’s liability is limited to damages for physical injuries and there is no recovery for economic loss alone” (id., at p. 18,45 Cal.Rptr. 17, 403 P.2d 145, italics added), supports a conclusion that there can be no recovery in negligence for any of the repair or correction costs here at issue. I disagree with the majority’s broad reading of the Seely dictum, and I agree with plaintiffs that Seely’s dictum should not be extended to bar recovery in negligence forcosts to correct serious safety violations in the construction of dwellings that pose a significant risk of personal injury or property damage. Because the majority relies heavily upon a broad reading of Seely’s dictum, and because I believe that reliance is misplaced, I review the decision in Seely in some detail.

    In Seely, supra, 63 Cal.2d 9, 45 Cal. Rptr. 17, 403 P.2d 145, the plaintiff sued the manufacturer in both warranty and strict liability after his truck, which he used in his commercial hauling business, was involved in an accident and needed to be repaired. Previously, the plaintiff had become dissatisfied with the truck; he informed the manufacturer that it was “galloping” (bouncing violently) and was difficult to handle. (Id., at p. 12, 45 Cal.Rptr. 17, 403 P.2d 145.) He used the truck in his business for approximately 11 months, during which time the manufacturer tried unsuccessfully on many occasions to correct the galloping problem to the plaintiffs satisfaction. During this period, the plaintiff paid off approximately half of the purchase price. Then one day, rounding a corner, the brakes failed and the truck overturned. The plaintiff was convinced that the accident was caused by the defective condition of the truck, and he also was dissatisfied with the overall performance of the truck, even before the accident. He had the truck repaired, ceased making payments, and sued for “(1) damages, related to the accident, for the repair of the truck, and (2) damages, unrelated to the accident, for the money he had paid on the purchase price and for the profits lost in his business because he was unable to make normal use of the truck.” (Id., at p. 13, 45 Cal.Rptr. 17, 403 P.2d 145.) The trial court found that the plaintiff had not proved that the galloping had caused the accident, and hence declined to award damages for repair costs. (Ibid.) The trial court did, however, award the other damages on the plaintiffs warranty cause of action. (Ibid.)

    In Seely, supra, 63 Cal.2d 9, 45 Cal. Rptr. 17, 403 P.2d 145, this court approved the award of those damages, based upon the plaintiffs warranty theory. Then, in dictum, we also addressed the plaintiffs’ strict liability claim. At this point in the analysis, we considered the damages described in item (2) above, finding them not allowable under strict liability theory. First, we noted concern about the prospect of permitting “unknown and unlimited” liability for such “commercial losses.” (Id, at p. 17, 45 Cal.Rptr. 17, 403 P.2d 145.) In this regard, we stated that a consumer (i.e., the plaintiff) is “fairly charged with the risk that the product will not match his economic expectations unless the manufacturer agrees that it will.”, (Id., at p. 18, 45 Cal.Rptr. 17, 403 P.2d 145.) The court then stated, in dictum within dictum that has been repeated in subsequent cases and is heavily relied upon by the majority: “Even in actions for negligence, a manufacturer’s liability is limited to damages for physical injuries and there is no recovery for economic loss alone.” (Ibid., italics added.)

    741*741 Clearly, this dictum in Seely, supra, 63 Cal.2d 9, 45 Cal.Rptr. 17, 403 P.2d 145,was directed toward the issue presented in Seely—the recovery of lost profits and related liability for commercial expectation damages. The majority, however, readsSeely’s dictum much more broadly, as precluding recovery in either negligence or strict liability for the cost of repairing serious and potentially life-threatening defects reflecting building safety code violations in residential housing. I find no such suggestion in Seely. Although the court felt it important to explain that a manufacturer should not be liable in tort for commercial losses caused by the failure of a product to meet the specific needs of a purchaser’s business (id., at p. 17, 45 Cal. Rptr. 17, 403 P.2d 145), it did not assert, expressly or by implication, that there could be no damages in negligence for correction of serious safety violations in residential housing that pose a danger of personal injury or serious property damage. Such a conclusion, of course, would be quite at odds with the tenor of Chief Justice Traynor’s above quoted observations in Connor, supra, 69 Cal.2d at pages 867-868, 73 Cal.Rptr. 369, 447 P.2d 609, rendered just a few years thereafter.

    Recognition of a homeowner’s ability to recover repair costs necessary to remedy serious safety defects in residential housing would not substantially implicate Seely’sconcerns about “unknown and unlimited” liability for “commercial losses.” (Seely, supra, 63 Cal.2d at p. 17, 45 Cal. Rptr. 17, 403 P.2d 145.) As plaintiffs note in their joint opening brief, “[r]ecovery of costs of repair in negligence is adequately limited. Code violations or other negligent construction must be proven. Causation must be proven. Costs of repair are limited in amount, even if expert opinions may vary as to exact amounts. The number of claimants is limited to the number of homes sold. These factors distinguish recovery of such costs from the `economic loss’ cases in which concern was expressed about potentially limitless claims by potentially limitless claimants.”

    In short, Seely’s cautions against allowing recovery of commercial expectation damages for lost profits do not justify barring recovery of the cost of repairing serious construction defects involving dwelling code violations that pose a threat to life and property. Accordingly, I find the majority unpersuasive to the extent that it relies on a broad interpretation of the Seely dictum.

    C.

    The understanding of the limited reach of Seely, supra, 63 Cal.2d 9, 45 Cal.Rptr. 17, 403 P.2d 145, set forth above is confirmed by numerous decisions described below, in which California courts repeatedly have allowed recovery of construction repair costs.

    Eleven years after Seely, the Court of Appeal in Cooper v. Jevne (1976) 56 Cal. App.3d 860, 128 Cal.Rptr. 724 (Cooper), allowed a negligence suit by condominium owners against architects, for “economic loss” damages (id., at p. 868, 128 Cal.Rptr. 724) that included “cost of repairs” (id., at p. 867, fn. 2, 128 Cal.Rptr. 724). Eight years later, the Court of Appeal decision in Huang v. Garner (1984) 157 Cal.App.3d 404, 203 Cal.Rptr. 800 (Huang), presented a situation essentially identical to the one that we address in this case. Apartment building owners sued the developer and contractor for costs to remedy serious safety code violations that, like the present case, fell into two categories: (i) building safety code violations that had manifested themselves in physical damage (id., at p. 419, 203 Cal.Rptr. 800 [these consisted of “deflected and cracked beams and dry rot damages to the balcony area”] ), and (ii) building safety code violations that had not yet manifested themselves in physical damage (id., at pp. 419-420, 203 Cal.Rptr. 800 [in Huang, as here, these consisted of inadequate or missing “firewalls, shear walls, fire stops, and other alleged defects in the structure which had not yet caused actual physical damages at the time of 742*742trial”]). The Court of Appeal in Huang, distinguishing Seely, ruled that the apartment owners could recover repair costs to remedy the serious building safety code violations that had not yet manifested themselves in physical damage. (Id., at pp. 421-425, 203 Cal.Rptr. 800.) Addressing the crucial question whether there was sufficient certainty that the plaintiffs in that case had suffered harm, the court noted in Huang that the defects were “dangerous, despite the fact that for approximately 17 years they have not caused personal injury to any tenant.” (Id., at p. 424, 203 Cal.Rptr. 800.) That court further observed: “Failure to comply with the Uniform Building Code by a developer-contractor involves potential risk of harm to later purchasers. In this case ample evidence was offered with respect to the cost of repairing the subject defects. Thus it is relatively certain that plaintiffs have suffered injury as a result of the defects…. [P]laintiffs have … suffered damages in being forced to repair the building.” (Ibid.)

    In Sumitomo Bank v. Taurus Developers, Inc. (1986) 185 Cal.App.3d 211, 229 Cal.Rptr. 719, a California appellate court followed Huang, supra, 157 Cal.App.3d 404, 203 Cal.Rptr. 800, and Cooper, supra, 56 Cal.App.3d 860, 128 Cal.Rptr. 724,allowing a purchaser of a condominium complex to pursue a negligence action against the builder for the cost to repair both then existing physical damage, e.g., cracking concrete and leaking roofs, and, apparently, detriment that had not yet manifested itself in physical damage, e.g., improperly designed drainage and structural retaining walls. (185 Cal.App.3d at pp. 216, 223-226, 229 Cal.Rptr. 719.) Subsequently, construction litigation decisions of our Courts of Appeal that have had occasion to address the aspect of Huang that is relevant here have uniformly treatedHuang’s analysis as accepted and established law. (See, e.g., Keru Investments, Inc. v. Cube Co. (1998) 63 Cal.App.4th 1412, 1421-1422, 74 Cal.Rptr.2d 744 [noting that in Huang the plaintiffs were not seeking lost opportunity costs, but instead, “`the cost to repair the defects in the structure in order to bring it into compliance with the Uniform Building Code'”]; Krusi v. S.J. Amoroso Construction Co. (2000) 81 Cal.App.4th 995, 1000-1001, 97 Cal.Rptr.2d 294 [describing with apparent approvalHuang’s conclusion that “the plaintiffs were entitled to economic damages” in order to correct building code violations “in addition to recovery for physical damage” and noting testimony in Huang that the defects were “`dangerous, despite the fact that for approximately 17 years they have not caused personal injury to any tenant'”]; cf.Stearman v. Centex Homes (2000) 78 Cal.App.4th 611, 618, 92 Cal.Rptr.2d 761[discussing with approval Huang’s definition and application of [Seely’s] economic loss rule”].)

    D.

    Finally, the above reading of Seely, supra, 63 Cal.2d 9, 45 Cal.Rptr. 17, 403 P.2d 145, also is confirmed by numerous cases from other jurisdictions that permit recovery of construction repair costs essentially identical to those here at issue. Although the majority adopts a broad view of the Seely dictum as barring recovery of costs for repair of construction defects that pose a substantial risk to persons and property, the trend of well-reasoned sister-court decisions is in the opposite direction.

    Almost all of the out-of-state decisions in this area cite and discuss Seely and adopt in general a version of the rule set out in that case, restricting recovery for commercial expectation damages. These sisterstate decisions recognize that Seelywas concerned primarily with precluding potentially limitless damages for lost profits and/or lost commercial expectations in the context of suits for product liability, and these out-of-state cases also recognize, explicitly or implicitly, that suits for costs to repair and correct dwelling safety defects that pose a serious risk to life and limb are743*743 clearly distinguishable from Seely and do not similarly implicate concerns of limitless damages.

    The majority, ante, 101 Cal.Rptr.2d at page 724, footnote 7, 12 P.3d at page 1131, footnote 7, mentions three such out-of-state decisions. (Kennedy v. Columbia Lumber & Mfg. Co. (1989) 299 S.C. 335, 384 S.E.2d 730, 737 [a builder does not escape liability for building code violations merely because “luck has smiled upon him and no physical harm has yet occurred…. [W]e once again join those states which strive to protect the modern new home buyer”]; Oates v. Jag, Inc. (1985) 314 N.C. 276, 333 S.E.2d 222, 225-226 [allowing recovery of repair costs to correct building code violations that had apparently not caused physical damages, and noting, “[w]e must be realistic… The purchaser can ill afford to suddenly find a latent defect in his or her home … and have no remedy for recourse”]; Council of Co-Owners v. Whiting-Turner, supra, 308 Md. 18, 517 A.2d 336 (Whiting-Turner).)

    The Whiting-Turner case is especially well reasoned and particularly apt here. In that case the Maryland high court permitted the plaintiff in a negligence action to recover the costs necessary to correct the construction of 10 vertical utility shafts in a 22-story condominium complex. The shafts presented a fire hazard because of the absence of required insulation—a serious violation of applicable building codes. (Whiting-Turner, supra, 517 A.2d at pp. 338-339.) Although the defective shafts all posed a clear danger of death or personal injury, none of them yet had produced any personal injury or physical property damage.

    The Whiting-Turner decision held: “`We reject the contention by appellant that there can be no recovery in negligence absent proof of personal injury or property damage. We hold that there can be recovery for economic loss. Why should a buyer have to wait for a personal tragedy to occur in order to recover damages to remedy or repair defects? In the final analysis, the cost to the developer for a resulting tragedy could be far greater than the cost of remedying the condition.’ [¶] We conclude that the determination of whether a duty will be imposed in this type of case should depend upon the risk generated by the negligent conduct, rather than upon the fortuitous circumstance of the nature of the resultant damage. Where the risk is of death or personal injury the action will lie for recovery of the reasonable cost of correcting the dangerous condition.” (Whiting-Turner, supra, 517 A.2d at p. 345, fn. omitted.)[1]

    In addition to these authorities, it is instructive to consider another out-of-state decision relied upon by defendants to support their assertion that all repair and correction costs in the present case should be barred under Seely’s rule restricting recovery of commercial expectation damages. As defendants observe, the Florida Supreme Court’s closely divided decision in Casa Clara v. Charley Toppino and Sons, Inc. (Fla.1993) 620 So.2d 1244 (Casa Clara) does support defendants’ and the majority’s position. There, a condominium association sued the supplier of concrete for having provided defective concrete with a high salt content that caused it to crack, putting at risk the dwellings constructed with the concrete. The Florida highcourt, employing a broad interpretation of Seely’s dictum barring recovery of commercial expectation damages (Casa Clara, at p. 1245 et seq.), and ignoring Chief Justice Traynor caution against relying on contract law to protect homeowners744*744 in such circumstances (see ante, 101 Cal.Rptr.2d at pp. 722-723, 12 P.3d at pp. 1128-1130), concluded that home buyers should “`bear the cost of economic losses sustained by those who failed to bargain for adequate contract remedies'” (Casa Clara, at p. 1247), and denied the condominium association any recovery in negligence premised upon “the mere possibility” that the defective concrete “will cause physical injury.” (Id., at p. 1247.) The court reasoned in Casa Clara that the plaintiffs'”argument goes completely against the principle that injury must occur before a negligence action exists. Because an injury has not occurred, its extent and the identity of injured persons is completely speculative.” (Ibid., italics added.) Thecourt in Casa Clara was divided four to three, and reached its conclusion over the dissenting justices’ protestations that “it stretches reason to apply the [economic loss] doctrine in this context.” (Id., at p. 1248 (cone. & dis. opn. of Barkett, C.J.).)

    Defendants, however, overlook the subsequent history of Casa Clara. More than a year ago, the Florida Supreme Court, by a six-to-one vote, “effectively overruled” that case. (Moransais v. Heathman (Fla. 1999) 744 So.2d 973, 985 (dis. opn. of Overton, J.) [characterizing the majority opinion] (Moransais).)[2] The Florida highcourt’s analysis and observations in Moransais concerning the proper scope ofSeely’s rule barring recovery of commercial expectation damages are especially instructive and strongly repudiate the broad application of the rule proposed by defendants and the majority.

    Moransais, supra, 744 So.2d 973, was a suit by a homeowner against a professional engineer who had inspected the plaintiffs home prior to purchase. The inspection had failed to disclose various (unspecified) defects that “rendered the home uninhabitable” (id., at p. 975), but which had not yet caused any property damage or personal injury. The plaintiff was not in privity with the engineer, but was with the engineer’s employer. The plaintiff sued the engineer personally for his negligent inspection of the home.

    Consistent with Cooper, supra, 56 Cal.App.3d 860, 128 Cal.Rptr. 724, in which ourCourt of Appeal permitted a similar action against architects, the Florida high courtin Moransais, supra, 744 So.2d 973, allowed the negligence suit against the engineer. In the process, the Florida court explained that its prior decisions—including, most notably, Casa Clara— “[u]nfortunately” had extended the economic loss doctrine “beyond its principled origins and have contributed to applications of the rule … well beyond our original intent.” (Moransais, supra, 744 So.2d at p. 980, italics added).) The court held that henceforth, the doctrine would be limited in order to avoid precluding traditional and well-established actions in tort. (Id., at p. 983.)

    Underscoring its retreat from its prior applications of Seely’s economic loss rule, thecourt explained in Moransais: “Today, we again emphasize that by recognizing thatthe economic loss rule may have some genuine, but limited, value in our damages law, we never intended to bar well-established common law causes of action, such as those for neglect in providing professional services. Rather, the rule was primarily intended to limit actions in the product liability context, and its application should generally be limited to those contexts or situations where the policy considerations are substantially identical 745*745 to those underlying the product liability type analysis…. The rule, in any case, should not be invoked to bar well-established causes of actions in tort….” (Moransais, supra, 744 So.2d at p. 983, fn. omitted, italics added.) The court in Moransais concluded by stressing that “`[i]f” the doctrine were genuinely applied to bar “all tort claims for economic losses without accompanying personal injury or property damage,” the rule would wreak havoc on the common law of torts.'” (Ibid., italics added.)

    Instead of expanding the reach of Seely’s rule barring recovery of commercial expectation damages beyond its proper original and intended scope, and instead of reaching to distinguish and disapprove established California Court of Appeal decisions that appropriately have limited the scope of Seely’s dictum in the context of serious building code violations, we should, like the Florida Supreme Court, recognize the appropriate limited reach of the Seely doctrine so that it does not preclude application of traditional rules of negligence permitting limited and rational recovery of correction costs in the circumstances here presented.

    II.

    Even outside the construction defect context, past California decisions do not support the majority’s conclusion that the dictum in Seely, supra, 63 Cal.2d 9, 45 Cal.Rptr. 17, 403 P.2d 145, properly should be interpreted to bar a plaintiff in a negligence action from recovering damages in the absence of personal injury or physical property damage.

    For example, in Potter v. Firestone Tire & Rubber Co. (1993) 6 Cal.4th 965, 25 Cal.Rptr.2d 550, 863 P.2d 795 (Potter), a case in which the plaintiffs were negligently exposed to carcinogens in their drinking water, we approved the plaintiffs’ recovery of costs for medical monitoring, prior to any actual manifestation of personal injury. (Id., at p. 974, 25 Cal.Rptr.2d 550, 863 P.2d 795.) Our reasoning in Potter in permitting the plaintiffs to recover the costs of medical monitoring is instructive here.

    First, Potter, supra, 6 Cal.4th 965, 25 Cal.Rptr.2d 550, 863 P.2d 795, employing established tort analysis, allowed recovery of costs to monitor an increased risk of future illness even though there was no “present physical injury or illness” (id, at p. 974, 25 Cal.Rptr.2d 550, 863 P.2d 795), upon a showing that the need for such monitoring was a reasonably necessary response to the defendant’s negligent acts. (Id., at p. 1009, 25 Cal.Rptr.2d 550, 863 P.2d 795.) The same reasoning applies here: Costs to remedy the most serious building code safety violations should be allowed to the extent they are a reasonably prudent and necessary response to the defendants’ negligent acts, incurred to avoid or minimize the damage that will result from such negligence.

    Second, Potter, supra, 6 Cal.4th 965, 25 Cal.Rptr.2d 550, 863 P.2d 795, approved the recovery of these limited damages, without regard to the majority’s broad reading of the Seely dictum. Potter is obviously distinguishable from Seely, in that Potteraddressed medical monitoring costs designed to guard against severe personal injury, whereas the Seely dictum was addressed to the question of allowing recovery of potentially limitless lost profits and lost commercial expectations. In the same fashion, the present case also is distinguishable from Seely—here we are concerned with repair costs designed to guard against severe personal injury and property damage caused by negligent construction of residential housing. Seely’s dictum did not stand in the way of allowing monitoring costs in Potter, and it does not stand in the way of allowing repair costs here.

    Third, as plaintiffs observe in their briefs, and as Potter, supra, 6 Cal.4th 965, 25 Cal.Rptr.2d 550, 863 P.2d 795, stressed (id., at pp. 1005-1006, 25 Cal.Rptr.2d 550, 863 P.2d 795), Civil Code section 3333 provides 746*746 that a plaintiff may recover in negligence damages “for all the detriment proximately caused thereby” (italics added)— the statute imposes no requirement of a showing of present physical injury or property damage.[3] This statute and comparable provisions of the Restatement Second of Torts (§§ 7, 910, & 917) are at odds with the majority’s broad application of the Seely dictum and with its holding that, in the absence of present physical injury or property damage, costs to remedy the most serious building code safety violations conceded here are not recoverable in negligence.

    Fourth, just as we acknowledged in Potter, supra, 6 Cal.4th 965, 25 Cal.Rptr.2d 550, 863 P.2d 795, with regard to the various policy reasons supporting recovery of medical monitoring costs in that case (id., at p. 1008, 25 Cal.Rptr.2d 550, 863 P.2d 795), here as well, policy factors relating to public safety, deterrence, mitigation of damages, economic efficiency, and “societal notions of fairness and elemental justice” (ibid.) all militate in favor of allowing the limited recovery proposed.

    Finally, as was true with regard to the medical monitoring costs at issue in Potter, supra, 6 Cal.4th 965, 25 Cal.Rptr.2d 550, 863 P.2d 795, the policy factors supporting the conclusion that we should allow recovery of costs to repair the most serious safety code defects here at issue—considerations aimed at ensuring that known safety risks in our housing stock are avoided, or at least corrected—in this case militate in favor of adopting a “fund remedy” procedure that we described with approval in Potter, supra, 6 Cal.4th at page 1010, footnote 28, 25 Cal.Rptr.2d 550, 863 P.2d 795.[4]

    III.

    As the majority implicitly concedes, the scope of Seely’s dictum, supra, 63 Cal.2d at page 18, 45 Cal.Rptr. 17, 403 P.2d 145, has been limited in a variety of contexts by decisions allowing such recovery upon a proper showing based upon the familiar six-factor test set out in Biakanja v. Irving (1958) 49 Cal.2d 647, 320 P.2d 16 (Biakanja)and J’Aire Corp. v. Gregory (1979) 24 Cal.3d 799,157 Cal.Rptr. 407, 598 P.2d 60 (J’Aire). In light of that authority, the majority finds it necessary to paraphrase the question before us as follows: “Does the law of negligence protect plaintiffs’ economic interests in having houses that fully comply with the building codes,measured by the cost of repairs or diminished value associated with noncompliance,even [though the asserted harm to those interests is unaccompanied by any injury to person or property?” (Maj. opn., 747*747 ante, 101 Cal.Rptr.2d at p. 732, 12 P.3d at p. 1137, italics added.)

    By reformulating the question in this manner, the majority skews the inquiry and fails adequately to consider that even if a negligence action cannot be maintained for the costs of remedying every minor building code violation, general common law negligence principles support a cause of action for the costs of correcting serious building code safety violations that pose a significant risk of death, serious personal injury, or considerable property damage if left unremedied.[5]

    In applying the traditional six-factor test, the majority determines with very little discussion that four of the six relevant factors set out in Biakanja, supra, 49 Cal.2d at page 650, 320 P.2d 16, and J’Aire, supra, 24 Cal.3d at page 804, 157 Cal.Rptr. 407, 598 P.2d 60, support plaintiffs’ right to sue in negligence for repair costs, but that two of the factors do not support a negligence action for costs of repair. The majority applies these factors out of their traditional order, and I shall do so here as well, addressing last the two assertedly problematic factors.

    A.

    Factor (1): The extent to which the transaction was intended to affect plaintiffs. The majority, in a single sentence, “assume[s] for argument’s sake that the conduct of a person engaged in construction is `intended to affect’ foreseeable purchasers of the property.” (Maj. opn., ante, 101 Cal.Rptr.2d at p. 732, 12 P.3d at p. 1138.) It is unclear why the majority includes that qualification; this factor is quite clearly met, and is in fact established law, as the Court of Appeal— which ultimately agreed with the majority’s conclusion that the repair costs sought by plaintiffs are not recoverable— readily acknowledged. The appellate court stated: “It is undisputed that the 162 unit residential condominium project at issue in the pending Provencal case was developed and built by [codefendant] Lyon. The subcontractors were also involved in the construction of Provencal. It is also undisputed that the Aas [plaintiffs’] 748*748single-family homes were developed and built by Lyon, and that Lyon subcontracted with several design and construction professionals to design and build the homes, [¶]These facts are sufficient to satisfy the first Biakanja factor under well-settled case law.” (Italics added.) I believe the majority should acknowledge, and not minimize, plaintiffs’ strong showing with regard to this factor.

    B.

    Factor (4): The closeness of the connection between defendants’ conduct and the injury suffered. The majority also “assume[s] that a sufficiently `close[ ] connection [exists] between … defendant’s conduct’ and the alleged defects.” (Maj. opn., ante,101 Cal.Rptr.2d at p. 733, 12 P.3d at p. 1138.) Again, the Court of Appeal expressed no hesitation on this point, stating: “Lyon and subcontractors do not vigorously contend their conduct is remote to [plaintiffs’] alleged harm. Their alleged conduct is sufficiently connected to the alleged construction defects alleged in the [plaintiffs’] pleadings.”

    C.

    Factor (5): The moral blame attached to defendants’ conduct. The majority concedes that “some `moral blame’ arguably `attach[es]’ to many deviations from the building codes,” but asserts that “the degree of blame would appear to depend upon the nature of the deviation.” (Maj. opn., ante, 101 Cal.Rptr.2d at p. 733, 12 P.3d at p. 1138, italics added.) Yet again, the Court of Appeal did not couch its review of this factor in such a grudging manner. It first quoted Chief Justice Traynor’s discussion inConnor, supra, 69 Cal.2d at page 867, 73 Cal.Rptr. 369, 447 P.2d 609, of the importance of providing a remedy in negligence for homeowner victims of defective construction, and then noted:

    “Chief Justice Traynor’s observations are relevant here in light of [plaintiffs’] allegations and offers of proof that the construction of their homes fell below the standard of care and failed to comply with the minimum requirements for shear walls and fire walls as set forth in the Uniform Building Code, and the minimum requirements set forth in the National Electrical Code. In Huang, supra, 157 Cal.App.3d at page 424, 203 Cal.Rptr. 800, the court addressed the moral blameworthiness of violating building codes and contracting regulations: `[Considering the importance of the minimum standards for housing set forth in the pertinent provisions of the Uniform Building Code, the violation of those standards involves sufficient “moral blame” to meet the fifth of the six criteria adopted inJ’Aire….’

    “[Plaintiffs] assert that assessing moral blame for violating building codes reflects California’s strong policy in favor of quality construction of homes. We agree…. `[N]egligent construction principles rest on a policy determination that purchasers of homes should not be harmed by defective housing caused by a breach of the duty to construct properly….”‘

    Once again, I submit that the majority ought to acknowledge, and not minimize, plaintiffs’ strong showing with regard to this factor.[6]

    D.

    Factor (6): The policy of preventing future harm. The majority concedes that this is “probably plaintiffs’ strongest argument.” (Maj. opn., ante, 101 Cal.Rptr.2d at p. 734, 12 P.3d at p. 1140.) The majority notes that the policy of preventing future 749*749 harm “might be served by a rule of tort liability” that permits recovery of repair costs on the facts alleged here. (Ibid., italics added.) The majority further acknowledges that it “might be less expensive,” as plaintiffs argue, “to require builders to pay to correct defects as soon as they are detected rather than after property damage or personal injury has occurred.” (Id. at p. 735, 12 P.3d at p. 1140, italics added.)

    After conceding these points, the majority proceeds, however, to diminish the weight of this factor by the majority’s depiction of the present suit, asserting that plaintiffs seek to make the “builders, in effect, the insurers of building code compliance, even as to defects that have not caused property damage or personal injury.” (Maj., opn.,ante, 101 Cal.Rptr.2d at p. 735, 12 P.3d at p. 1140, italics added.)

    Contrary to the majority’s mischaracterization, plaintiffs’ action in this case clearly does not attempt to make defendants “insurers.” The suit simply seeks to have defendants pay limited repair costs necessitated by defendants’ concededly negligent conduct in constructing plaintiffs’ homes. Moreover, the majority fails to acknowledge that any liability on the part of defendants plainly is limited in duration—it expires, by statute, 10 years after the completion of construction (Code Civ. Proc., § 337.15)—which period may have already elapsed in this litigation.[7]

    The majority also asserts that allowing the limited form of recovery sought here “should also be unnecessary to the extent buyers timely enforce their contract, warranty and inspection rights, and to the extent building authorities vigorously enforce the applicable codes for new construction.” (Maj., opn., ante, 101 Cal. Rptr.2d at p. 735, 12 P.3d at p. 1140, italics added.) That is true, but it begs the question that we are required to answer: What remedy is there when there is no privity, and hence there are no contract rights, or when there is privity, but disclaimers or technical notice rules preclude enforcement of contract rights (seeante, at pp. 722-723, 12 P.3d at pp. 1128-1130), or when there is inspection, but the defect cannot reasonably be noticed by the usual home buyer (see Connor, supra,69 Cal.2d at p. 867, 73 Cal.Rptr. 369, 447 P.2d 609; Kriegler, supra, 269 Cal.App.2d at p. 228, 74 Cal.Rptr. 749)—or when, as apparently has occurred with alarming frequency, local building inspectors (for whatever reason) fail to notice and require correction of serious building code safety violations? Does the “policy in favor of preventing future harm” call for recognition of a limited negligence action to fill the gaps in such circumstances? The majority never satisfactorily answers this crucial question.

    Again, the Court of Appeal had no trouble with this factor. It wrote:

    “The policy of preventing future harm is fundamental to the tort system, and California case law demonstrates this policy applies to safeguarding against preventable construction defects which result in physical injuries to people and property…. [As] our high court [has] stated: `[T]he prevention of future negligent construction of buildings upon insufficiently supportive material would not be furthered by exempting [the builder] from liability for his negligence. [Citations.]’

    “… [I]n Connor, supra, 69 Cal.2d at pages 867-868, 73 Cal.Rptr. 369, 447 P.2d 609,Chief Justice Traynor eloquently expressed the judiciary’s concern for proper construction of housing in California: `The admonitory policy of the law of torts calls for the imposition of liability on [defendant] for its conduct in this case. Rules that tend to discourage misconduct are particularly appropriate when applied to an established industry, [¶] By all the 750*750 foregoing tests, [defendant] had a duty to exercise reasonable care to prevent the construction and sale of seriously defective homes to plaintiffs…. In any event, there is no enduring social utility in fostering the construction, of seriously defective homes.

    Here, [plaintiffs] have alleged causes of action in negligence against a home developer, a general contractor, and various housing subcontractors for recovery of damages resulting, from numerous alleged construction defects, including but not limited to serious violations of minimum standards set forth in the, Uniform Building Code and other governing codes. The policy concern for ensuring proper construction of vital. structural housing components, such as shear walls, is meant to protect not only the physical structure, but also the personal safety of all homeowners.” (Italics added.)

    In an immediately following footnote, the Court of Appeal observed: “In this regard, we take judicial notice of one of the recommendations of the California State Seismic Commission, which investigated the Northridge earthquake under our Governor’s Earthquake Executive Order: `The greatest opportunity to ensure seismic safety is during a building’s design and construction…. The Northridge earthquake and other past earthquakes have clearly and repeatedly demonstrated the remarkable effectiveness of paying attention to quality in reducing earthquake losses. Quality assurance is the single most important policy improvement needed to manage California’s earthquake risk.’ (California Seismic Safety Commission, `Northridge Earthquake: Turning Loss To Gain,’ Dec. 1, 1994, at p. 22, italics added.)”[8]

    In my view, the policy of preventing future harm operates here as a factor that very strongly militates in favor of recognizing a right of action in negligence to recover costs to remedy safety code violations that pose a serious threat of injury to the residents of and visitors to the dwellings here at issue. Once again, I submit that the majority should frankly concede, rather than attempt to minimize, plaintiffs’ strong showing with regard to this factor.

    E.

    Factor (2): The foreseeability of harm to plaintiffs. The majority’s entire treatment of this factor is as follows: “[T]o ask . . . whether the harm to plaintiffs was `foreseeab[le]’ [citation] simply begs the question: What harm?” (Maj. opn., ante, 101, Cal.Rptr.2d at p. 732, 12 P.3d at p. 1138.)

    In contrast to the majority’s approach, the Court of Appeal stated: “[T]he SupremeCourt cases that have addressed the second Biakanja factor … in the construction defect context have held that harm to homeowners caused by negligent construction is foreseeable. [Citations.] [¶] … [Here,] as to the alleged violations of governing building codes, it is foreseeable that such code violations may result in otherwise preventable injury to persons or other property. For example, it is foreseeable that an insufficient fire wall in a condominium may fail in the event there is a fire in an adjoining unit, resulting in a conflagration that could have been prevented had the fire wall been constructed in compliance with the minimum building code safety standards.” (Italics added.)

    It is foreseeable that a reasonably prudent person, made aware of seriously deficient shear walls and fire walls in his or her home, would suffer appreciable present harm by virtue of being exposed to, and thereby having the legal duty to address (seepost, 101 Cal.Rptr.2d at pp. 751-752, 12 P.3d at pp. 1155-1156), a 751*751 known unreasonable risk to personal safety and to property.

    F.

    Factor (3): The degree of certainty that plaintiff’s suffered injury. This is the factor that the majority finds is both (i) the most important in this case, and (ii) the one that presents a “relatively objective obstacle to plaintiffs’ claim” to recover the cost of remedying the serious building code safety violations conceded on this record. (Maj. opn., ante, 101 Cal.Rptr.2d at p. 746, 12 P.3d at p. 1150.) The majority begins with the premise that “[c]onstruction defects that have not ripened into property damage, or at least into involuntary out-of-pocket losses, do not comfortably fit the definition of `”appreciable harm”‘—an essential element of a negligence claim.” (Id., at p. 732, 12 P.3d at p. 1137, citing Davies v. Krasna (1975) 14 Cal.3d 502, 513, 121 Cal.Rptr. 705, 535 P.2d 1161 (Davies).)

    Davies, supra, 14 Cal.3d 502, 121 Cal. Rptr. 705, 535 P.2d 1161, is not on point. That case addressed the question at what point, after a breach of duty, a plaintiff suffers damages sufficient to begin the running of the statute of limitations. Daviesdid not concern, and did not address, whether, and under what conditions, the incurring of reasonably necessary repair costs in the absence of personal injury or property damage would establish a sufficient degree of certainty that injury had been suffered. Of course, a decision does not stand for a proposition that it did not address or consider.

    The majority nevertheless relies upon Davies, supra, 14 Cal.3d 502, 121 Cal.Rptr. 705, 535 P.2d 1161, to support its implicit conclusion that on the facts presented, there exists an insufficient degree of certainty that plaintiffs have suffered harm.[9] I believe that under the standard of review articulated by the majority, the conclusion it reaches is incorrect.

    As the majority asserts, “the question is whether, disregarding conflicting evidence,indulging in every legitimate inference that may be drawn from the evidence, and viewing the record in the light most favorable to plaintiffs,” there is substantial evidence to support a judgment in plaintiffs’ favor. (Maj. opn., ante, 101 Cal. Rptr.2d at p. 723, 12 P.3d at p. 1130, italics added.) In my view, if we faithfully apply that standard, we must conclude that there is substantial evidence establishing with sufficient certainty that with regard to the most serious safety code violations at issue in this litigation, plaintiffs have suffered appreciable present injury or harm.

    The Court of Appeal below expressly found that the crucial “degree of certainty that plaintiffs suffered injury” factor was met on these facts. The Court of Appeal stated: “[W]e agree with the Huang court’s conclusion that evidence of a negligent failure by a developer or contractor to comply with the minimum standards set forth in governing building codes, supported by evidence of the cost to repair the building code violations, is sufficient to 752*752 satisfy the Biakanja `degree of certainty of harm’ factor.” The Court of Appeal quoted extensively from offers of proof by experts retained by both plaintiffs and defendants, to the effect that the dwellings contained inadequate shear walls and fire walls, and that repairs to correct these problems would cost “several hundreds of thousands of dollars;” and then concluded: “[Plaintiffs’] offer of proof, and the construction defect allegations in [the] complaint in connection with the negligence cause of action, are sufficient to show the requisite certainty … that [plaintiffs] have suffered latent harm.”

    As suggested above, I agree with the majority to the extent it declines to allow recovery in negligence for the cost of repairing construction defects that pose no significant risk of serious personal injury or property damage. Accordingly, I would not recognize a negligence action to recover the costs of repairing matters such as “discolored drain stoppers, and inoperable garbage disposals.” (Maj. opn., ante, 101 Cal.Rptr.2d at p. 733, 12 P.3d at p. 1138.) On the other hand, I believe that by being subjected to the risk posed by defective shear walls and fire walls, plaintiffs have suffered appreciable present compensable injury.[10] Indeed, plaintiffs’ knowledge of these defects places upon them a legal duty to make necessary repairs or corrections.

    Most of the plaintiffs in these consolidated cases (those who live in condominiums) are under legal compulsion, through their condominium association, to repair common areas—and this would certainly include, a duty to remedy known major safety violations in shear walls and fire walls located in common areas that had not yet caused actual physical damage or injury. (Civ.Code §§ 1364, subd. (a) [duty to repair common areas], 1351, subd. (b) [common area defined].)

    Similarly, all single-family-structure homeowner plaintiffs in this proceeding are under a duty to disclose known defects to potential purchasers, and perhaps more importantly, like any possessor of real property, they also are under a legal obligation to take reasonable steps to remedy known safety defects in or on their own property. A reasonably prudent homeowner, learning of, for example, the serious shear wall or fire wall defects in his or her home, would act to correct or repair those defects, in order to avoid unreasonable risk of collapse of the structure during a windstorm or earthquake, or in order to avoid rapid spread of a fire from one room to others.

    Plaintiffs’ showing here is no less than that found to be adequate in similar circumstances in Cooper, supra, 56 Cal. App.3d 860, 128 Cal.Rptr. 724, Huang, supra, 157 Cal.App.3d 404, 203 Cal.Rptr. 800, Sumitomo Bank v. Taurus Developers, 753*753 Inc., supra, 185 Cal.App.3d 211, 229 Cal. Rptr. 719, and in various out-of-state decisions—most notably, the Maryland high court’s decision in Whiting-Turner, supra, 308 Md. 18, 517 A.2d 336 and the Florida Supreme Court’s decision in Moransais, supra, 744 So.2d 973. Nor is plaintiffs’ showing any less than that found to be adequate in analogous circumstances in Potter, supra, 6 Cal.4th 965, 25 Cal. Rptr.2d 550, 863 P.2d 795.

    I submit that on these facts compensable present injury to plaintiffs is reasonably certain, because a reasonably prudent person, having become aware of the unreasonable risk posed by known building code safety defects such as inadequate shear walls and fire walls, would act to repair or correct those defects. I would recognize a limited negligence action as described above, and, in light of the public interest in ensuring that such repairs actually are undertaken, I would require court-supervised disbursement of damages awarded in such cases. (See Potter, supra, 6 Cal.4th at p. 1010, fn, 28, 25 Cal.Rptr.2d 550, 863 P.2d 795, quoted ante, fn. 4.)[11]

    IV.

    California is prone to earthquakes and, tragically, the negligent construction of residential housing almost surely will result in the deaths and injury of numerous current and future residents of this state, as it has in the past. In the context of a case such as the one now before us, the goal of tort law is to minimize, in an appropriate and balanced manner, the number of those deaths and injuries. In light of today’s majority opinion—which misapplies and improperly disapproves California’s established case law and, in failing to recognize an appropriate and limited right to recover costs to remedy serious safety code violations, rejects the reasoning of well-considered decisions of our sisterstate courts—the obligation falls upon the Legislature to correct this court’s unfortunate misstep in the development of the law, and to provide the protection that California residents deserve.

    Concurring and Dissenting Opinion by MOSK, J.

    Because I believe it is economically efficient to provide plaintiffs with a remedy to repair conditions that allegedly pose a serious safety hazard, I respectfully dissent from the majority’s contrary conclusion. I believe the Supreme Court of Indiana pointed out quite well the inefficiency inherent in the economic loss rule as applied to such conditions: “If there is a defect in a stairway and the purchaser repairs the defect and suffers an economic loss, should he fail to recover because he did not wait until he or some member of his family fell down the stairs and broke his neck?” (Barnes et ux. v. Mac Brown & Co., Inc. et al, (1976) 264 Ind. 227, 230 [342 N.E.2d 619, 621].) Thus, to answer the majority’s rhetorical question, “What harm?” (maj. opn, ante, 101 Cal.Rptr.2d at p. 732, 12 P.3d at p. 1138), I would say, the harm that will arise when homeowners, believing, as humans are wont to do, that injury only befalls others, fail to repair hazardous conditions.

    It is evident that many Californians live in modern mass-market housing. It appears, moreover, that cutting corners is a prevailing problem in the development industry. The descriptions of construction defects in the numerous letter briefs we have received from the construction law bar suggest as much. The briefs describe the willingness of some developers to evade or stint the Uniform Building Code’s safety requirements, among other elements. In this context, the majority’s result 754*754 is likely, as one litigant put it, to create “an invitation for developers, general contractors and subcontractors to ignore [construction] Code requirements when building and developing homes.”

    The majority tacitly acknowledge the risks of inefficiency their rule generates: “[T]o require builders to pay to correct defects as soon as they are detected rather than after property damage or personal injury has occurred might be less expensive. On the other hand, such a rule would likely increase the cost of housing by an unforeseeable amount as builders raised prices to cover the increased risk of liability.” (Maj. opn., ante, 101 Cal. Rptr.2d at p. 735, 12 P.3d at p. 1140.) The first sentence in the quotation is almost certainly correct, as it is less costly to society to require a contractor to nail down the loose stair than to pay for hospitalization after a needless tumble down the flight of steps. The second sentence, by contrast, even if correct, assumes that builders are inadequately constructing mass-market housing—there is no: risk of liability if the housing is correctly built. And it can only be correct if builders pass along the savings realized by poor construction to their customers, rather than realizing increased profits from deficient building practices. I do not share the majority’s evident assumption that the former is correct.

    I would adopt a view similar to that of Judge Richard Posner in Eljer Mfg., Inc. v. Liberty Mut. Ins. Co. (7th Cir.1992) 972 F.2d 805 (Eljer). Interpreting comprehensive general liability insurance policies that defined the term “property damage” as “`physical injury to … tangible property'” (id. at p. 807), but considering facts similar to those of this case, Posner wrote that physical injury to property occurs when it “results from … physical linkage, as when a potentially dangerous product is incorporated into another and, because it is incorporated and not merely contained (as a piece of furniture is contained in a house but can be removed without damage to the house), must be removed, at some cost, in order to prevent the danger from materializing. There is an analogy to fixtures in the law of real and personal property—improvements to property that cannot be removed without damaging it. See, e.g., UCC § 9-313.” (Id. at p. 810, italics added.)[1]

    The Eljer approach obviates the need to consider the Biakanja factors (Biakanja v. Irving (1958) .49 Cal.2d 647, 650, 320 P.2d 16; see Ott v. Alfa-Laval Agri, Inc. (1995) 31 Cal.App.4th 1439, 1449, 37 Cal.Rptr.2d 790)—although even under those factor’s I believe, like the Chief Justice but unlike the majority, that damages are sufficiently ascertainable to justify liability. The rule I favor would state that property damage occurs when what may be termed “fixtures” for purposes of discussion, inseparable from the structure of the houses or condominiums and inaccessible for repair without destroying existing features, are negligently built or installed. (Cf. Cal. U. Com. Code, § 9102, subd. (a)(41).)[2]

    We here consider alleged latent defects, capable of causing serious injury or major property damage, that may only be found years or decades after the developer caused them, yet require repair to avoid 755*755 later injury or major property loss. (In this regard, Code Civ.Proc, § 337.15 permits recovery for property damage caused by latent defects in construction only for 10 years after the work is substantially completed. The statute of limitations is already a substantial bar to any threat of limitless liability.) I believe a narrow rule could be drawn to provide a tort remedy for such defects. It seems that a finely crafted rule would not need to apply to such items as negligent heating, air conditioning, and ventilation work, or, to refer to the majority’s rather dismissive examples, “doors that are out of plumb, discolored drain stoppers, and inoperable garbage disposals” (maj. opn, ante, 101 Cal.Rptr.2d at p. 733, 12 P.3d at p. 1138). (See Council of Co-Owners v. Whiting Turner (1986) 308 Md. 18, 35, fn. 5 [517 A.2d 336, 345] [limiting recovery to fixing defects that pose “a clear danger of death or personal injury”].)[3] I regret the majority’s unwillingness to adopt even a minimal safeguard. The proper view, I believe, is that articulated inBiakanja: “Liability has [been] imposed, in the absence of privity, upon suppliers of goods and services which, if negligently made or rendered, are `reasonably certain to place life and limb in peril.'” (Biakanja v. Irving, supra, 49 Cal.2d 647, 649, 320 P.2d 16.)

    [1] The following is a representative excerpt from plaintiff’s offer of proof:

    “5. During the investigation at Provencal in this case, engineers … observed violations of the Uniform Building Code, including failures to properly construct shear walls and failures to properly connect shear walls to other building components. Such shear walls and connections are required under the Uniform Building Code to prevent or minimize property damage and personal injury in the event of seismic and wind forces….

    “6. During the investigation at Provencal in this case, architects . . . observed violations of the Uniform Building Code, including failures to properly construct one-hour and two-hour fire protection in party walls. Such fire protection measures are required under the Uniform Building Code to prevent or minimize property damage and personal injury in the event of a fire….[¶] … [¶]

    “8. During the investigation of Provencal in this case, [an] electrical engineer … observed numerous violations of the National Electrical Code, including failures to support electrical cables, improperly supported light fixtures, and improperly labeled electrical circuits…. [¶] … [¶]

    “10. For many of the Uniform Building Code and National Electrical Code violations described in paragraphs 5, 6, and 8, there has not yet been any physical property damage or personal injury….”

    [2] Plaintiff in Provencal subsequently moved to amend its complaint to allege a cause of action for breach of implied warranty. Plaintiff’s request for judicial notice of defendant Lyon’s memorandum in opposition to the motion, filed after the Court of Appeal affirmed the trial court’s ruling, is denied.

    [3] The trial court explained: “I would address [at trial] any issues that are over and above my ruling that you felt were close calls and listen to what your proffer might be at the appropriate time.” There is, thus, no basis for assuming that every item on the exhaustive lists of construction defects attached to defendants’ motions in limine is deemed excluded, even if plaintiffs are able to prove that a particular defect has actually caused property damage.

    [4] Sabella v. Wisler (1963) 59 Cal.2d 21, 27-30, 27 Cal.Rptr. 689, 377 P.2d 889; Stewart v. Cox(1961) 55 Cal.2d 857, 861-863, 13 Cal. Rptr. 521, 362 P.2d 345; Hale v. Depaoli (1948) 33 Cal.2d 228, 230-232, 201 P.2d 1; Sumitomo Bank v. Taurus Developers, Inc. (1986) 185 Cal.App.3d 211, 223-224, 229 Cal. Rptr. 719; Huang v. Garner (1984) 157 Cal. App.3d 404, 419-425, 203 Cal.Rptr. 800; Cooper v. Jevne (1976) 56 Cal.App.3d 860, 867-869, 128 Cal.Rptr. 724.

    [5] Stearman v. Centex Homes (2000) 78 Cal. App.4th 611, 613, 92 Cal.Rptr.2d 761 (citing the many decisions applying strict liability to construction defects); Avner v. Longridge Estates (1969) 272 Cal.App.2d 607, 609-615, 77 Cal.Rptr. 633; Kriegler v. Eichler Homes, Inc. (1969) 269 Cal.App.2d 224, 227-229, 74 Cal. Rptr. 749.

    [6] Stearman v. Centex Homes, supra, 78 Cal. App.4th 611, 613-614, 617-623, 92 Cal. Rptr.2d 761.

    [7] Courts in other jurisdictions have reached various conclusions on this subject. South Carolina broadly holds builders liable in tort for all deviations from applicable building code and industry standards that diminish the value of a house. (Kennedy v. Columbia Lumber & Mfg. Co. (1989) 299 S.C. 335, 384 S.E.2d 730, 736-738.) Maryland more narrowly permits homeowners to recover in a negligence action the reasonable cost of correcting construction defects that present “a clear danger of death or personal injury,” but not conditions that present merely “a risk to general health, welfare, or comfort…” (Council of Co-Owners v. Whiting Turner (1986) 308 Md. 18, 517 A.2d 336, 344-345 & fn. 5). A North Carolina decision does not clearly identify the circumstances that will support recovery, but holds that the plaintiffs stated a cause of action for negligence by alleging they “were forced to undergo extensive demolition and repair work to correct the defective, dangerous and unsafe conditions caused by the defendant’s negligence.” (Oates v. Jag (1985) 314 N.C. 276, 333 S.E.2d 222, 224-226.)

    In contrast, the Supreme Court of Nevada, after tentatively rejecting the economic loss rule in construction defect cases (Calloway v. City of Reno (1997) 113 Nev. 564, 939 P.2d 1020, 1024-1026), reversed course on rehearing and held that no liability exists for defects that cause damage only to the house and its components. (Calloway v. City of Reno (Nev. 2000) 993 P.2d 1259, 1263-1270 [trial court properly dismissed negligence claims alleging that defective framing caused water intrusion, damage to flooring and ceilings, and structural and wood decay].)

    [8] The six factors were: “the extent to which the transaction was intended to affect the plaintiff, the foreseeability of harm to him, the degree of certainty that the plaintiff suffered injury, the closeness of the connection between the defendant’s conduct and the injury suffered, the moral blame attached to the defendant’s conduct, and the policy of preventing future harm.” (Biakanja, supra, 49 Cal.2d 647, 650, 320 P.2d 16.)

    [9] See generally Stearman v. Centex Homes, supra, 78 Cal.App.4th 611, 613, 92 Cal. Rptr.2d 761. Compare Peterson v. Superior Court (1995) 10 Cal.4th 1185, 1200, 43 Cal. Rptr.2d 836, 899 P.2d 905, Cronin v. J.B.E. Olson Corp. (1972) 8 Cal.3d 121, 130, 104 Cal.Rptr. 433, 501 P.2d 1153, andPrice v. Shell Oil Co. (1970) 2 Cal.3d 245, 251 and footnote 6, 85 Cal.Rptr. 178, 466 P.2d 722 (all acknowledging the doctrine’s potential applicability to persons in the business of residential construction).

    [10] The concurring and dissenting justices would hold that property damage occurs when a defective component is incorporated into a house. (Cone. & dis. opn. of Mosk, J., 101 Cal.Rptr.2d at pp. 754-755, 12 P.3d at pp. 1157-1158; see also cone. & dis. opn. of George, C.J., at p. 753, fn. 11, 12 P.3d at p. 1156, fn. 11.) The decision offered as support for that view, Eljer Mfg., Inc. v. Liberty Mut. Ins. Co.(7th Cir.1992) 972 F.2d 805, however, offers its conclusion not as a rule of tort liability but as an interpretation of contractual language in an insurance policy. While we intimate no view as to Eljer’s correctness as a matter of California law, we find the decision insufficiently relevant to the question before us to be of any assistance.

    [11] Plaintiffs also argue that Seely, supra, 63 Cal.2d 9, 45 Cal.Rptr. 17, 403 P.2d 145, does not apply to the negligent performance of services, as distinguished from the negligent manufacture of products,but the basis for that argument appears, once again, to be that J’Aire, supra, 24 Cal.3d 799, 157 Cal.Rptr. 407, 598 P.2d 60, takes precedence over Seely. (See North American Chemical Co. v.Superior Court, supra, 59 Cal.App.4th 764, 778-785, 69 Cal.Rptr.2d 466, and Huang v. Garner, supra, 157 Cal.App.3d 404, 421-424, 203 Cal.Rptr. 800 [both concluding that liability under J’Aire is unaffected by Seely]; cf. Cooper v. Jevne, supra, 56 Cal.App.3d 860, 867-869, 128 Cal.Rptr. 724[relying on Biakanja, supra, 49 Cal.2d 647, 320 P.2d 16, rather than J’Aire, to reach the same conclusion].)

    [12] In addition to these cases cited by plaintiffs, the Chief Justice relies on Connor v. Great Western Sav. & Loan Assn. (1968) 69 Cal.2d 850, 73 Cal.Rptr. 369, 447 P.2d 609, Krusi v. S.J. Amoroso Construction Co. (2000) 81 Cal.App.4th 995, 97 Cal.Rptr.2d 294, Stearman v. Centex Homes, supra,78 Cal. App.4th 611, 92 Cal.Rptr.2d 761, and Keru Investments, Inc. v. Cube Co. (1998) 63 Cal. App.4th 1412, 74 Cal.Rptr.2d 744. None of these cases purports to hold that a plaintiff may recover for construction defects that have not caused damage to other property.

    In Connor v. Great Western Sav. & Loan Assn., supra, 69 Cal.2d 850, 73 Cal.Rptr. 369, 447 P.2d 609,this court held that persons whose homes “suffered serious damage from cracking caused by ill-designed foundations” (id. at p. 856, 73 Cal.Rptr. 369, 447 P.2d 609) could sue the construction lender as the joint venturer of the developer on the theory that it owed the plaintiffs a duty to “exercise reasonable care to protect them from damages caused by major structural defects” (id. at p. 866, 73 Cal.Rptr. 369, 447 P.2d 609). Thus, to the extent Connor might be thought relevant to the case before us, it is entirely consistent with the rule we apply today. (The Legislature has rejected Connor’sholding that construction lenders are liable in negligence for construction defects. See Civ.Code, § 3434.)

    The courts in Krusi v. S.J. Amoroso Construction Co., supra, 81 Cal.App.4th 995, 1005, 97 Cal.Rptr.2d 294, and Keru Investments, Inc. v. Cube Co., supra, 63 Cal.App.4th 1412, 1423-1425, 74 Cal.Rptr.2d 744, held simply that causes of action for construction defects accrued when the defects caused damage and belonged to the persons who owned the buildings at that time, rather than to the subsequent purchasers. Because the courts in both cases held the plaintiffs lacked standing to sue, neither court faced any question of liability for purely economic damages. In any event, the buildings at issue in both cases had actually suffered major structural damage as a result of construction defects. (Krusi, at p. 998, 97 Cal.Rptr.2d 294; Keru, at p. 1415, 74 Cal.Rptr.2d 744.) The court inStearman v. Centex Homes, supra, 78 Cal. App.4th 611, 616-623, 92 Cal.Rptr.2d 761, held merely that strict liability applies when a defective component of a house damages a nondefective component. (See 101 Cal. Rptr.2d p. 728, 12 P.3d p. 1134, ante.)

    [13] Amicus curiae explains in detail how alleged defects that might on “[i]nitial impression[]” seem “trivial, nitpickey and even ridiculous,” might cause or indicate serious problems. “Closet shelving, interior doors not fitting properly, sagging roof rafters, spalling plaster, [and] GFI [ground fault interrupt] receptacles missing” are cited as examples. Expert testimony at trial, amicus curiae speculates, might show that “the location of the closet shelving in conjunction with the lighting poses a fire hazard and violates the National Electrical Code. The interior doors may not fit properly because the buildings/homes have moved due to structural problems or soil issues. The roof rafters may be sagging because they were not attached properly, and their installation violates the Uniform Building Code. The plaster could be spalling due to missing structural components, and by the way, maybe the plaster is supposed to serve as some shear. The missing GFI receptacles pose a fire hazard and a life safety threat to adults and children and the fact that they are missing violates the National Electrical Code.”

    [14] This case illustrates the problem. The Chief Justice apparently concludes that the defects alleged in this case put plaintiffs’ homes at risk of collapse or fire. (Cone. & dis. opn. of George, C.J., post, 101 Cal. Rptr.2d at p. 738, 12 P.3d at p. 1143.) To be sure, plaintiffs have alleged that shear and fire walls do not comply with the applicable building codes, and that the purpose of codes for these components is to protect against those sorts of harm. (See ante, at p. 722 & fn. 1, 12 P.3d p. 1129 & fn. 1.) Yet, as the trial court recognized (see ante, at p. 722, 12 P.3d p. 1129), this does not necessarily mean that any given defect is sufficiently grave to pose a realistic risk of serious damage. (See alsoante, at pp. 732-734, 12 P.3d pp. 1137-1140.)

    [15] Plaintiffs may be surprised to read in the Chief Justice’s concurring and dissenting opinion that he believes they have abandoned this claim. Plaintiffs did abandon a claim for so-called stigma damages, representing the residual loss of market value after repairs have been made, after losing on this issue in the Court of Appeal. As that court explained, no reported decision in this state appears to authorize such recovery; we intimate no view on the matter.

    In contrast, diminished value is simply one of the standard alternative measures of damage for injury to property. The successful plaintiff in such cases ordinarily recovers either the diminution in market value attributable to the injury or the cost of repairs, whichever is less (Mozzetti v. City of Brisbane(1977) 67 Cal.App.3d 565, 576, 136 Cal.Rptr. 751), although the rule is not rigid and the court may award the greater amount in appropriate circumstances (Heninger v. Dunn (1980) 101 Cal.App.3d 858, 863-864, 162 Cal. Rptr. 104; see generally 6 Witkin, Summary of Cal. Law (9th ed. 1988) Torts, §§ 1461-1462, pp. 934-935). Plaintiffs understandably emphasize the cost of repairs in their briefs and argument because damages measured by the cost of repairs typically exceed damages measured by diminution in value.

    This case is being remanded for further proceedings, possibly including a trial on any alleged defects that have caused property damage. (See ante, 101 Cal.Rptr.2d at pp. 722, 723, 12 P.3d at pp. 1129, 1130.) Because plaintiffs have not expressly abandoned the right to recover the diminished value of their homes, should that turn out to be the appropriate measure of damages, we see no basis on which to preclude the court from applying the ordinary law of remedies.

    [16] Arguing that courts should do so, the Chief Justice cites Potter v. Firestone Tire & Rubber Co.(1993) 6 Cal.4th 965, 25 Cal.Rptr.2d 550, 863 P.2d 795. (Cone. & dis. opn. of George, C.J., 101 Cal.Rptr.2d at pp. 746, 753, 12 P.3d at pp. 1150, 1156.) The plaintiffs in Potter sought, among other things, medical monitoring costs following their exposure to carcinogenic toxic waste. In a footnote, we noted the suggestion of “[v]arious commentators and courts … that creation of court-supervised funds to pay medical monitoring claims as they accrue, rather than the award of a lump-sum verdict, may be a more appropriate mechanism for compensating plaintiffs in a toxic exposure case.” (Id. at p. 1010, fn. 28, 25 Cal.Rptr.2d 550, 863 P.2d 795.) Nothing in the Potter decision, which we painstakingly limited to its specific factual and legal context, suggests that courts have a broad, general role in supervising the disbursement of tort recoveries.

    [17] In fact, the Legislature in this term has considered and rejected proposals to make persons engaged in residential construction liable for the cost of bringing homes into compliance with the building codes, without regard to the existence of property damage (Assem. Bill. No. 1669 (1999-2000 Reg. Sess.), as introduced Mar. 15, 1999) and to create a state-sanctioned home warranty program (Assem. Bill No. 1221 (1999-2000 Reg. Sess.)). We note the Legislature is also considering a bill that would recognize a lack of “empirical data on the incidence of construction defects, the amount of construction defects litigation, and whether there is any causal relationship between shoddy construction, construction defect litigation, and the construction of new condominium and affordable housing,” and commission a comprehensive study to collect such data. (Sen. Bill No. 1882 (1999-2000 Reg. Sess.).) Defendants’ motion for judicial notice of these bills is granted.

    [1] In the omitted footnote, the court wrote in Whiting-Tumer: “It is the serious nature of the risk that persuades us to recognize the cause of action in the absence of actual injury. Accordingly, conditions that present a risk to general health, welfare, or comfort but fall short of presenting a clear danger of death or personal injury will not suffice. A claim that defective design or construction has produced a drafty condition that may lead to a cold or pneumonia would not be sufficient.” (Whiting-Turner, supra,517 A.2d at p. 345, fn. 5.)

    [2] The opinion in Moransais was filed after briefing in the present case was completed. On August 28, 2000, however, codefendant William Lyon Company filed a “Supplemental Brief of Additional Authorities,” citing and discussing the recent subsequent history of a Nevada case cited in earlier briefs, and citing three other recent (and distinguishable) cases from other jurisdictions. Nonetheless, the supplemental brief failed to note that, more than one year earlier, the Florida Supreme Courteffectively had overruled Casa Clara, supra, 620 So.2d 1244, the primary out-of-state case upon which Lyon had relied in its “Answer Brief on the Merits.”

    [3] That statute provides: “For the breach of an obligation not arising from contract, the measure of damages, except where otherwise expressly provided by this code, is the amount which will compensate for all the detriment proximately caused thereby, whether it could have been anticipated or not.” (Civ.Code, § 3333.)

    [4] Our opinion in Potter stated in this regard: “Various commentators and courts have suggested that creation of court-supervised funds to pay medical monitoring claims as they accrue, rather than the award of a lump-sum verdict, may be a more appropriate mechanism for compensating plaintiffs in a toxic exposure case. [Citation.] [¶] In Ayers [v. Jackson Tp. (1987)] 106 N.J. 557, 525 A.2d 287, 314, the court observed: `Although conventional damage awards do not restrict plaintiffs in the use of money paid as compensatory damages, mass-exposure toxic tort cases involve public interests not present in conventional tort litigation. The public health interest is served by a fund mechanism that encourages regular medical monitoring for victims of toxic exposure.’ [Citation.] Thus, in contrast to a lump-sum payment, a fund remedy will encourage plaintiffs to spend money to safeguard their health by not allowing them the option of spending the money for other purposes. The fund remedy will also assure that medical monitoring damages will be paid only to compensate for medical examinations and tests actually administered, thus serving to limit the liability of defendants to the amount of expenses actually incurred. (Ibid.) In turn, this should tend to reduce insurance costs, both to potential defendants and the general public alike.” (Potter, supra, 6 Cal.4th at p. 1010, fn. 28, 25 Cal.Rptr.2d 550, 863 P.2d 795.)

    [5] Although plaintiffs’ complaint sought, among other things, damages for the diminution in value of their homes, plaintiffs’ briefing and argument before this court make it quite clear that they have abandoned any such claim and that they now limit their negligence claim regarding code violations that have not manifested themselves in physical injury or property damage to recovery of repair costs. Plaintiffs’ joint opening brief states the issue as follows: “Can homeowners and a homeowners association . . . recover in negligence for the cost to repair violations of governing building codes . . . even though the violations have not yet caused physical property damage?” (Italics added.) This phrasing of the issue and this singular focus of recovery sought at this stage in the litigation is repeated throughout the briefing. Indeed, plaintiffs specifically assert, “the measure of damages for negligent construction is limited to the cost of repair. Imaginative consequential damages are not applicable.” (Italics added.) And plaintiffs also argue that defendants in this case should be responsible “only . . . for compliance with governing building codes” and “will not be exposed to monetary damages beyond the cost of repair.” Similarly, at oral argument, counsel for plaintiffs asserted that at this stage plaintiffs do not seek lost profits or any other such difficult-to-define form of damages, but instead, and only, funds necessary to address “very specific code violations for which specific repairs are designed and for which there is a known measure of damages”—namely, the specific “costs to repair code violations.”

    Thus, the matter in contention, at this point, is simply whether, with respect to code violations that have not manifested themselves in physical injury or property damage, we should recognize a limited negligence action for recovery of specific and definable repair costs. In my view it does not advance this inquiry for the majority to invoke repeatedly plaintiffs’ now abandoned claim for damages relating to the diminished value of their homes.

    [6] At the same time, I completely agree with the majority’s additional assertion that “we may … reasonably assign reduced moral blame to less serious defects … such … as … discolored drain stoppers, and inoperable garbage disposals.” (Maj. opn., ante, 101 Cal.Rptr.2d at p. 733, 12 P.3d at p. 1138.) Indeed, as explained below, I believe that we should distinguish between allowing recovery for correction of serious life- and property-endangering code violations, and repair of defects such as those just listed.

    [7] The record indicates that defendants may yet challenge plaintiffs’ claims based upon the statute of limitations.

    [8] In this regard, codefendant Lyon conceded at oral argument that “it is reasonable to assume that the percentage [of Northridge earthquake homeowners] that did suffer damage probably included a lot of … homes that did not have Compliance with the [prevailing] safety code[s].”

    [9] In the process, the majority rejects plaintiffs’ assertion that the cost of repairs is an “accepted measure of damage for construction defects and that plaintiffs could make the cost of repairs certain . . . by voluntarily repairing defects and obtaining a receipt for money spent.” (Maj. opn., ante, 101 Cal. Rptr.2d at p. 732, 12 P.3d at p. 1138, italics added.) Although this point was expressly conceded by codefendant Branco Corporation at oral argument, the majority refuses to accept that concession, asserting simply that to do so would confuse “the measurement of alleged damages with the ability of particular facts to support a tort action.” (Ibid.) Of course, reasonable certainty in both (i) the need to make repairs, and (ii) the amount of money required to accomplish repairs, must be proved. I view codefendant Branco Corporation’s concession as recognizing that, if a homeowner reasonably were to undertake and pay for repairs in order to avoid the risk posed by serious building safety code violations such as the shear wall and fire protection violations here at issue, a court should conclude with a high degree of certainty that the homeowner has suffered injury, and that the thirdBiakanja/J’Aire factor is met.

    [10] In this regard, I find helpful Morris v. Osmose Wood Preserving (1995) 340 Md. 519, 667 A.2d 624, in which the Maryland high court explained that its decisions in this area “reveal a two part approach to determine the degree of risk required to circumvent the economic loss rule. We examine both the nature of the damage threatened and the probability of damage occurring to determinewhether the two, viewed together, exhibit a clear, serious, and unreasonable risk of death or personal injury. Thus, if the possible injury is extraordinarily severe, [e.g.,] multiple deaths, we do not require the probability of the injury occurring to be as high as we would require if the injury threatened were less severe, [e.g.,] a broken leg or damage to property. Likewise, if the probability of the injury occurring is extraordinarily high, we do not require the injury to be as severe as we would if the probability of injury were lower.” (Id., at pp. 631-632, italics added.)

    The majority hypothesizes that distinguishing between “serious” and “minor” defects would “in practice” prove to be difficult and would “likely … insulate from demurrer and summary judgment virtually all complaints containing allegations of building code violations.” (Maj. opn., ante, 101 Cal.Rptr.2d at pp. 735-736, 12 P.3d at pp. 1140-1141.) As noted above, such a distinction has been recognized for more than 14 years (Whiting-Turner, supra, 308 Md. 18, 517 A.2d 336, 345, fn. 5), but the majority fails to cite any authority suggesting that such problems have occurred in practice.

    [11] As Justice Mosk explains in his separate dissent, and as codefendant Lyon argued in the alternative in the Court of Appeal, the theory advanced in Judge Posner’s opinion in Eljer Mfg., Inc. v. Liberty Mut. Ins. Co. (7th Cir.1992) 972 F.2d 805, provides, by analogy, additional and separate support for recognition of a right to recover repair costs in the present case.

    [1] I italicize must because the word prefigures cautionary language in the Eljer opinion. The risk of harm-in Eljer, the “expected failure rate” (Eljer, supra, 972 F.2d at p. 812)— “must be sufficiently high … to induce a rational owner to replace it” (ibid.) or repair it.

    [2] Eljer relied on Illinois law in interpreting the insurance policies. The Appellate Court of Illinois later rejected its interpretation. (Travelers Ins. Co. v. Eljer Mfg., Inc. (1999) 307 Ill.App.3d 872 [241 Ill.Dec. 178, 718 N.E.2d 1032, 1039-1041], review granted (1999) 186 Ill.2d 590 [243 Ill.Dec. 569, 723 N.E.2d 1170].) Leaving aside the policies’ definition of “property damage,” however, Eljer’s conclusion favoring the so-called incorporation doctrine-that property damage occurs when defective installation or construction requires that walls be torn out or the like-is persuasive and should be applied here.

    [3] Like the Chief Justice, I concur in the majority’s conclusion regarding trivial and nonhazardous alleged defects of the type to which the majority refer.

     

    ×
  • Creekridge v. Whitten

    Creekridge v. Whitten

    177 Cal.App.4th 251 (2009)

    253*253 Angius & Terry, Paul P. Terry, Jr., Bradley J. Epstein and Sam Y. Chon for Plaintiff and Appellant.

    Klinedinst, G. Dale Britton, Natalie P. Vance and Jason W. Schaff for Defendant and Respondent C. Scott Whitten.

    Law Offices of Robles & Castles, William A. Robles and Ranjani Ramakrishna for Defendant and Respondent Monier Inc.

    Anwyl, Scoffield & Stepp, Lindy H. Scoffield and Pamela A. Lewis for Defendant and Respondent REO Roofing Company.

    OPINION

    BUTZ, J.—

    This is a construction defect case involving a reroofing of 11 buildings that house 61 units in a townhome community. The trial court granted summary judgment to the roofing defendants. The trial court found that the plaintiff townhome association did not meet the statute of limitations because the association had notice of a water moisture problem inside the window of one unit as a result of the new roof, and this unit reported several broken roof tiles.

    (1) We shall reverse. We conclude there are triable issues of material fact on the two statute of limitations issues: (1) whether the alleged defect was patent (i.e., apparent to an average consumer from a reasonable inspection); 254*254 and (2) whether the defect can be deemed discovered in the latent defect context because the damage was sufficiently appreciable so that plaintiff suspected or reasonably should have suspected that defendants had done something wrong to plaintiff.

    FACTUAL AND PROCEDURAL BACKGROUND

    On June 18, 2004, plaintiff Creekridge Townhome Owners Association, Inc. (plaintiff), filed a construction defect lawsuit, concerning a reroofing project, against defendants C. Scott Whitten, Inc. (Whitten), REO Roofing Company (REO), and Monier Inc. (Monier). Whitten was the roofing manager and inspector, REO was the roofer, and Monier was the roofing supplier.

    The lawsuit involves the reroofing of 11 buildings, comprising 61 units, in plaintiff’s townhome community. The reroofing was completed in early 1997, and replaced the buildings’ old shake roofs with Cedarlite concrete tile roofs.[1]

    In late June 1997, one owner in plaintiff’s community described in a letter to plaintiff’s board that she had a water moisture problem inside her second-story bedroom window as a result of the new tile roof; she also reported several broken roof tiles. The summary judgment record contains no other evidence of any other roof problems until 2003.

    In the winter of 2003, plaintiff suffered numerous roof leaks. The following spring, plaintiff hired a roofing consultant, Randy Davis, who found multiple causes for the leaks and multiple types of roof defects.

    As noted, on June 18, 2004, plaintiff sued Whitten, REO and Monier for these alleged roof defects. Plaintiff set forth causes of action for breach of warranty (express and implied), breach of contract, and negligence.

    Whitten moved for summary judgment on statute of limitations grounds. After tentatively denying this motion, the trial court reversed course and 255*255 granted it, citing an opinion decided during the summary judgment proceedings, Landale-Cameron Court, Inc. v. Ahonen (2007) 155 Cal.App.4th 1401 [66 Cal.Rptr.3d 776](Landale).

    REO and Monier in turn obtained a stipulated judgment in their favor on the same grounds as the Whitten summary judgment.[2] This stipulated judgment resulted in a second appeal by plaintiff, C059458, which we have consolidated with the Whitten appeal, C058300.

    DISCUSSION

    We uphold a summary judgment if all the evidentiary papers associated with it—which we review independently—show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law. We do not resolve factual issues but ascertain whether there are any to resolve. (Code Civ. Proc., § 437c, subd. (c);[3]Colores v. Board of Trustees (2003) 105 Cal.App.4th 1293, 1305 [130 Cal.Rptr.2d 347] (Colores); Flait v. North American Watch Corp.(1992) 3 Cal.App.4th 467, 475 [4 Cal.Rptr.2d 522].)

    Because a summary judgment denies the losing party its day in court, we liberally construe the evidence in support of that party and resolve doubts concerning the evidence in that party’s favor. (Wiener v. Southcoast Childcare Centers, Inc. (2004) 32 Cal.4th 1138, 1142 [12 Cal.Rptr.3d 615, 88 P.3d 517]; Colores, supra, 105 Cal.App.4th at p. 1305.)

    Whitten based its summary judgment motion entirely on two interrogatory answers that plaintiff furnished, as read in light of the gravamen of plaintiff’s complaint.

    The two interrogatories, propounded by Monier to plaintiff, were:

    “No. 14: Identify the date when you first became aware that the Cedarlite tile roof was leaking.

    256*256 “No. 15: Referencing your previous response, how did you become aware that the Cedarlite tile roof was leaking[?]”

    Plaintiff provided the same answer to both interrogatories:

    “Homeowner Heidi Goodman of 7434 Creekridge Lane wrote a letter to the Board that was discussed in open session at the 6/24/97 board meeting minutes describing a water moisture problem inside her second[-]story bedroom window as a result of the tile roofs, in addition to reporting several broken roof tiles.”

    The gravamen of plaintiff’s complaint alleges that the reroofing “deficiencies include, among other things, the following: [¶] a. Water infiltration through roofs and roof materials, and within roof systems.”

    With this background in mind, we now turn to the two statute of limitations issues of patent defect and latent defect/discovery.

    I. Patent Construction Defect

    (2) Section 337.1 sets forth a statute of limitations of four years for a “patent” construction defect, which starts running when the construction is substantially completed. (§ 337.1, subd. (a)(1).)

    (3) The test to determine whether a construction defect is patent is an objective test that asks “whether the average consumer, during the course of a reasonable inspection, would discover the defect. The test assumes that an inspection takes place.” (Geertz v. Ausonio (1992) 4 Cal.App.4th 1363, 1370 [6 Cal.Rptr.2d 318]; see § 337.1, subd. (e); 3 Witkin, Cal. Procedure (5th ed. 2008) Actions, § 606, pp. 787-788.) This test generally presents a question of fact, unless the defect is obvious in the context of common experience; then a determination of patent defect may be made as a matter of law (including on summary judgment). (Preston v. Goldman(1986) 42 Cal.3d 108, 110-111, 123 [227 Cal.Rptr. 817, 720 P.2d 476] (Preston);Mills v. Forestex Co. (2003) 108 Cal.App.4th 625, 644 [134 Cal.Rptr.2d 273] (Mills);Tomko Woll Group Architects, Inc. v. Superior Court (1996) 46 Cal.App.4th 1326, 1339 [54 Cal.Rptr.2d 300] (Tomko); Geertz, supra, 4 Cal.App.4th at p. 1368.)

    Here, the only evidence of defect presented by defendant Whitten in its summary judgment motion regarding the 1997 reroof construction was an interrogatory answer that referenced a letter a homeowner in plaintiff’s community had written to plaintiff’s board. According to the interrogatory answer, this letter “was discussed in open session at the 6/24/97 board 257*257 meeting . . . [and] describ[ed] a water moisture problem inside [the homeowner’s] second[-]story bedroom window as a result of the tile roofs, in addition to reporting several broken roof tiles.”

    Plaintiff countered this evidence with a declaration from the roofing consultant whom plaintiff had hired after incurring many roof leaks in 2003. The consultant found multiple defects regarding the 1997 reroofing, and stated that these defects “would not be readily apparent to a lay person.”

    Based on this evidence, we cannot say that the reroofing defects alleged here were patent defects as a matter of law. Only one roof-related “water moisture problem” in one unit of a 61-unit, 11-building complex—and that problem was inside a window—coupled with a report of several broken roof tiles from that unit’s owner, were presented. That is it. This evidence pales in comparison to situations involving obvious defects in the context of common experience, in which a patent defect has been found as a matter of law: for example, a backyard pond with only a one-foot-high wall around it, into which a toddler fell (Preston, supra, 42 Cal.3d at pp. 110-111, 121-123); and a visible defect in pedestrian pavement substantial enough to cause a pedestrian to trip and fall (Tomko, supra, 46 Cal.App.4th at p. 1339).

    The four-year statute of limitations for a patent construction defect does not provide a basis on which to grant summary judgment here. That leads us to the statute of limitations concerning a latent construction defect and the discovery of such a defect.

    II. Latent Construction Defect/Discovery

    (4) A “latent” construction defect is one that is “not apparent by reasonable inspection.” (§ 337.15, subd. (b).) As to a latent defect that is alleged in the context of the challenged causes of action here—negligence, breach of warranty, and breach of contract—three statutes of limitations are in play: sections 338, 337 and 337.15. “The interplay between these [three] statutes sets up a two-step process: (1) actions for a latent defect must be filed within three years (§ 338 [injury to real property]) or four years (§ 337 [breach of written contract]) of discovery, but (2) in any event must be filed within ten years (§ 337.15) of substantial completion.” (North Coast Business Park v. Nielsen Construction Co. (1993) 17 Cal.App.4th 22, 27 [21 Cal.Rptr.2d 104] (North Coast); see Regents of University of California v. Hartford Acc. & Indem. Co.(1978) 21 Cal.3d 624, 640-641 [147 Cal.Rptr. 486, 581 P.2d 258*258 197]; Landale, supra, 155 Cal.App.4th at p. 1407; Mills, supra, 108 Cal.App.4th at pp. 643-644.)[4]

    (5) As noted, the limitations periods of sections 337 and 338 start to run upon “discovery.” Discovery occurs when the plaintiff suspects, or reasonably should suspect, that someone has done something wrong to the plaintiff, causing the injury (here, “wrong” is not used in a technical sense, but in a lay one). (Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 397-398 [87 Cal.Rptr.2d 453, 981 P.2d 79]; Landale, supra, 155 Cal.App.4th at p. 1407; Mills, supra, 108 Cal.App.4th at pp. 643-644.) “A plaintiff has reason to suspect when he has notice or information of circumstances to put a reasonable person on inquiry.” (Landale, supra, 155 Cal.App.4th at pp. 1407-1408; see Norgart, supra, 21 Cal.4th at p. 398.) In other words, “sections 337 and 338 begin to run only after the damage is sufficiently appreciable to give a reasonable man notice that he has a duty to pursue his remedies.” (North Coast, supra, 17 Cal.App.4th at p. 27, italics added; see Mills, supra, 108 Cal.App.4th at p. 646.)

    Again, though, we cannot say, as a matter of law, that “a water moisture problem” inside a window as a result of the tile roofs—in just one unit of a complex that comprises 61 units and 11 buildings—along with a report of several broken roof tiles by that unit’s owner, constitutes sufficiently appreciable damage to give a reasonable person notice that remedies must be pursued.

    It was the recent decision in Landale that prompted the trial court to change its mind and grant the summary judgment. We are not similarly persuaded.

    Landale was a summary judgment construction defect case involving an eight-unit condominium complex that incurred various water leaks during rains. (Landale, supra, 155 Cal.App.4th at p. 1403.) The central issue was whether the three-year statute of limitations for injury to real property (§ 338) had been tolled. (Landale, at p. 1404.) To decide that issue, the court first had to decide whether the statute had run absent tolling. (Id. at pp. 1403-1404, 1407-1410.)

    The Landale court concluded that the three-year statute of limitations had run on the complaint filed in January 2001 based on the following evidence: 259*259 The former board president of the plaintiff homeowners association admitted in her deposition (1) that there were heavy rains in 1997, which caused rainwater to collect on the roofs and resulted in leaks where there had not been any leaks before, and that in 1997 a handyman applied some tar to the roof and other areas; and (2) that she received a letter in June 1998 that specifically mentioned leaks in her unit and at least two other units during the 1996-1997 rainy season, as well as a problem with waterproofing of the walls in another unit, roof and deck problems, and stairway leaks. (Landale, supra, 155 Cal.App.4th at pp. 1404-1405, 1408.)

    Based on this evidence, Landale concluded: “Here, at some unspecified date in 1997, . . . the . . . president [of the board of the plaintiff homeowners association (HOA)] . . . noticed water intrusion and observed a handyman trying to repair roof leaks. The HOA thus had notice or information that should have prompted further inquiry `through the exercise of reasonable diligence.’ [Citation.] Indeed, the June 1998 letter . . . to [the HOA board president] indicated that during the 1997 heavy El Niño rains several other units had leaks, and there were also `roof and deck problems’ and `stairway leaks.’ Such other damage would no doubt have been revealed to the HOA with the exercise of reasonable diligence. [¶] Thus, in the present case, the [three-year, section 338] statute of limitations began to run at the latest by the end of 1997 . . . and the complaint filed on January 19, 2001, was therefore untimely—unless the statute of limitations was tolled. . . .” (Landale, supra,155 Cal.App.4th at p. 1408.)

    In Landale, then, by the end of 1997, there were leaks in at least three of the complex’s eight units, including the unit of the board president of the plaintiff homeowners association. Furthermore, at this point, the president had observed a handyman trying to repair roof leaks, and there was a problem with waterproofing of the walls in another unit as well as roof and deck problems and stairway leaks. In short, at least half of the units in the Landale complex were leaking, and repair attempts had been observed by the homeowners association board president. This stands in stark contrast to the evidence presented here: One of 61 units had a window “water moisture problem” as a result of the tile roofs; the owner of that unit reported several broken concrete roof tiles; and no repairs had been observed.

    Finally, the sharp distinction between the Landale facts and the facts here highlights a significant concern raised by plaintiff. If we were to find in favor of defendants, that would force property owner associations across the state to conduct extensive investigations for possible construction defects based on any report of a small problem. This could prove very expensive for the associations, and would often be futile. We decline to impose such a burden.

    260*260 DISPOSITION

    The judgments (order granting summary judgment in favor of Whitten, No. C058300, and the subsequent stipulated judgment in favor of REO and Monier, No. C059458) are reversed. Plaintiff is awarded its costs on both appeals. (Cal. Rules of Court, rule 8.278(a)(1)-(3).)

    Sims, Acting P. J., and Robie, J., concurred.

    [1] A different roofer reroofed the remaining six buildings in plaintiff’s townhome community, and is not a party to this appeal. Also, there was another roofer besides REO who worked on some of the 11 buildings at issue here; that roofer went bankrupt and is not part of this appeal.

    [2] Plaintiff also sued defendant Monier for strict liability. There is hardly any mention of this cause of action in the briefs. Nevertheless, judgment was granted in favor of Monier based on the statute of limitations grounds on which defendant Whitten obtained summary judgment. We are reversing the summary judgment in favor of Whitten and, consequently, the stipulated judgment in favor of Monier and REO. To the extent the strict liability cause of action against Monier was summarily foreclosed on these statute of limitations grounds, it has been revived with this reversal as well.

    [3] Undesignated statutory references are to the Code of Civil Procedure.

    [4] Because the motion for summary judgment was brought by defendant Whitten, who was the roofing manager and inspector, the motion focused on defects in construction rather than on defects in the roofing product itself. The decision in Mills notes that “[n]either section [referring to both § 337.1 (patent construction defect) and § 337.15 (latent construction defect)] applies to the manufacturer of a product incorporated into the improvement. . . .” (Mills, supra, 108 Cal.App.4th at p. 643.) (See fn. 2,ante.)

     

    ×
  • Erlich v. Menezes

    Erlich v. Menezes

    Summary by Mary M. Howell, Esq.:

    Facts

    Plaintiffs Barry and Sandra Erlich contracted with defendant John Menezes, a licensed general contractor, to build a “dream house” on their ocean-view lot. The Erlichs moved into their house in December 1990. In February 1991, the rains came. The house leaked from every conceivable location. Mr. Menezes’s efforts to remedy the situation were to no avail. The Erlichs testified that they suffered emotional distress as a result of the defective condition of the house and Menezes’s invasive and unsuccessful repair attempts. Mr. Erlich even developed a permanent heart condition. The Erlichs sought recovery against Mr. Menezes on several theories, including breach of contract, fraud, negligent misrepresentation, and negligent construction. At trial, the Erlichs were awarded emotional distress damages along with compensatory damages. The Court of Appeal affirmed. The Supreme Court reversed the judgment of the Court of Appeal and remanded for further proceedings.

    Held

    Mr. Menezes’s negligence directly caused only economic injury and property damage and breached no duty independent of the contract. As such, the Erlichs could not recover damages for emotional distress based upon breach of the contract to build the house.

    *** End Summary ***

    Erlich v. Menezes

    87 Cal.Rptr.2d 886 (1999)

    888*888 Edward J. Horowitz, Claudia Ribet, Los Angeles; Knapp, Petersen & Clarke, Daniels, Baratta & Fine, Alan J. Carnegie, James L. Hsu and Stephen M. Harris, Glendale, for Defendant, Cross-complainant and Appellant.

    Sonnenschein, Nath & Rosenthal, Paul E.B. Glad, Paula M. Yost and Cheryl Dyer Berg, San Francisco, for American Insurance Association and Crum & Forster Insurance Company as Amici Curiae on behalf of Defendant, Cross-complainant and Appellant.

    Alister McAlister, Wilton, for National Association of Independent Insurers as Amicus Curiae on behalf of Defendant, Cross-complainant and Appellant.

    Crosby, Heafey, Roach & May, Kathy M. Banke, Oakland, and Kay Long-Marin, for Continental Metroplex as Amicus Curiae on behalf of Defendant, Cross-complainant and Appellant.

    Fred J. Hiestand, Sacramento, for the Association for California Tort Reform as Amicus Curiae on behalf of Defendant, Cross-complainant and Appellant.

    Cox, Castle & Nicholson, Sandra C. Stewart and Debbie L. Freedman, Los Angeles, for the Building Industry Legal Defense Foundation and the California Building Industry Association as Amici Curiae on behalf of Defendant, Cross-complainant and Appellant.

    Morgenstein & Jubelirer, James L. McGinnis and Laura E. Gasser, San Francisco, for Centex Homes as Amicus Curiae on behalf of Defendant, Cross-complainant and Appellant.

    Songstad, Randall & Ulich, Andrew K. Ulich, Irvine, and Thomas D. Deardorff, II, for Taylor Woodrow Homes, Inc., as Amicus Curiae on behalf of Defendant, Cross-complainant and Appellant.

    Chapin Fleming McNitt Shea & Carter, Craig H. Bell, San Diego, and Keith A. Turner, Los Angeles, for Truck Insurance Exchange as Amicus Curiae on behalf of Defendant, Cross-complainant and Appellant.

    John R. DeLoreto; Law Offices of Victor G. Zilinskas, Zilinskas & Jacobs, Victor G. Zilinskas and Michael L. Smith, Santa Barbara, for Plaintiffs and Respondents.

    Williams, Wester & Hall and Scott A. Williams, Greenbrae, as Amici Curiae on behalf of Plaintiffs and Respondents.

    Kasdan, Simonds, McIntyre, Epstein & Martin and David G. Epstein, Irvine, for Consumer Attorneys of California as Amicus Curiae on behalf of Plaintiffs and Respondents.

    Keppleman & Associates and Richard D. Keppleman, San Luis Obispo, for Cross-defendant and Respondent Ron Rebaldo.

    Borton, Petrini & Conron, Craig R. McCollum and Gary A. Bixler, for Cross-defendant and Respondent John Cravens Plastering, Inc.

    BROWN, J.

    We granted review in this case to determine whether emotional distress damages are recoverable for the negligent breach of a contract to construct a house. A jury awarded the homeowners the full cost necessary to repair their home as well as damages for emotional distress caused by 889*889 the contractor’s negligent performance. Since the contractor’s negligence directly caused only economic injury and property damage, and breached no duty independent of the contract, we conclude the homeowners may not recover damages for emotional distress based upon breach of a contract to build a house.

    I. Factual And Procedural Background

    Both parties agree with the facts as ascertained by the Court of Appeal. Barry and Sandra Erlich contracted with John Menezes, a licensed general contractor, to build a “dreamhouse” on their ocean-view lot. The Erlichs moved into their house in December 1990. In February 1991, the rains came. “[T]he house leaked from every conceivable location. Walls were saturated in [an upstairs bedroom], two bedrooms downstairs, and the pool room. Nearly every window in the house leaked. The living room filled with three inches of standing water. In several locations water `poured in … streams’ from the ceilings and walls. The ceiling in the garage became so saturated … the plaster liquefied and fell in chunks to the floor.”

    Menezes’s attempts to stop the leaks proved ineffectual. Caulking placed around the windows melted, “`ran down [the] windows and stained them and ran across the driveway and ran down the house [until it] … looked like someone threw balloons with paint in them at the house.'” Despite several repair efforts, which included using sledgehammers and jackhammers to cut holes in the exterior walls and ceilings, application of new waterproofing materials on portions of the roof and exterior walls, and more caulk, the house continued to leak — from the windows, from the roofs, and water seeped between the floors. Fluorescent light fixtures in the garage filled with water and had to be removed.

    “The Erlichs eventually had their home inspected by another general contractor and a structural engineer. In addition to confirming defects in the roof, exterior stucco, windows and waterproofing, the inspection revealed serious errors in the construction of the home’s structural components. None of the 20 shear, or load-bearing walls specified in the plans were properly installed. The three turrets on the roof were inadequately connected to the roof beams and, as a result, had begun to collapse. Other connections in the roof framing were also improperly constructed. Three decks were in danger of `catastrophic collapse’ because they had been finished with mortar and ceramic tile, rather than with the light-weight roofing material originally specified. Finally, the foundation of the main beam for the two-story living room was poured by digging a shallow hole, dumping in `two sacks of dry concrete mix, putting some water in the hole and mixing it up with a shovel.'” This foundation, required to carry a load of 12,000 pounds, could only support about 2,000. The beam is settling and the surrounding concrete is cracking.

    According to the Erlichs’ expert, problems were major and pervasive, concerning everything “related to a window or waterproofing, everywhere that there was something related to framing,” stucco, or the walking deck.

    Both of the Erlichs testified that they suffered emotional distress as a result of the defective condition of the house and Menezes’s invasive and unsuccessful repair attempts. Barry Erlich testified he felt “absolutely sick” and had to be “carted away in an ambulance” when he learned the full extent of the structural problems. He has a permanent heart condition, known as superventricular tachyarrhythmia, attributable, in part, to excessive stress. Although the condition can be controlled with medication, it has forced him to resign his positions as athletic director, department head and track coach.

    Sandra Erlich feared the house would collapse in an earthquake and feared for her daughter’s safety. Stickers were placed on her bedroom windows, and 890*890 alarms and emergency lights installed so rescue crews would find her room first in an emergency.

    Plaintiffs sought recovery on several theories, including breach of contract, fraud, negligent misrepresentation, and negligent construction. Both the breach of contract claim and the negligence claim alleged numerous construction defects.

    Menezes prevailed on the fraud and negligent misrepresentation claims. The jury found he breached his contract with the Erlichs by negligently constructing their home and awarded $406,700 as the cost of repairs. Each spouse was awarded $50,000 for emotional distress, and Barry Erlich received an additional $50,000 for physical pain and suffering and $15,000 for lost earnings.

    By a two-to-one majority, the Court of Appeal affirmed the judgment, including the emotional distress award. The majority noted the breach of a contractual duty may support an action in tort. The jury found Menezes was negligent. Since his negligence exposed the Erlichs to “intolerable living conditions and a constant, justifiable fear about the safety of their home,” the majority decided the Erlichs were properly compensated for their emotional distress.

    The dissent pointed out that no reported California case has upheld an award of emotional distress damages based upon simple breach of a contract to build a house. Since Menezes’s negligence directly caused only economic injury and property damage, the Erlichs were not entitled to recover damages for their emotional distress.

    We granted review to resolve the question.

    II. DISCUSSION

    A.

    In an action for breach of contract, the measure of damages is “the amount which will compensate the party aggrieved for all the detriment proximately caused thereby, or which, in the ordinary course of things, would be likely to result therefrom” (Civ. Code, § 3300), provided the damages are “clearly ascertainable in both their nature and origin” (Civ.Code, § 3301). In an action not arising from contract, the measure of damages is “the amount which will compensate for all the detriment proximately caused thereby, whether it could have been anticipated or not” (Civ.Code, § 3333).

    “Contract damages are generally limited to those within the contemplation of the parties when the contract was entered into or at least reasonably foreseeable by them at that time; consequential damages beyond the expectation of the parties are not recoverable. [Citations.] This limitation on available damages serves to encourage contractual relations and commercial activity by enabling parties to estimate in advance the financial risks of their enterprise.” (Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 515, 28 Cal. Rptr.2d 475, 869 P.2d 454 (Applied Equipment ).) “In contrast, tort damages are awarded to [fully] compensate the victim for [all] injury suffered. [Citation.]” (Id. at p. 516, 28 Cal.Rptr.2d 475, 869 P.2d 454.)

    “`[T]he distinction between tort and contract is well grounded in common law, and divergent objectives underlie the remedies created in the two areas. Whereas contract actions are created to enforce the intentions of the parties to the agreement, tort law is primarily designed to vindicate “social policy.” [Citation.]’ “(Hunter v. Up-Right, Inc. (1993) 6 Cal.4th 1174, 1180, 26 Cal.Rptr.2d 8, 864 P.2d 88, quoting Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 683, 254 Cal. Rptr. 211, 765 P.2d 373 (Foley).) While the purposes behind contract and tort law are distinct, the boundary line between them is not (Freeman & Mills, Inc. v. Belcher Oil Co. (1995) 11 Cal.4th 85, 106, 44 Cal.Rptr.2d 420, 900 P.2d 669 (cone, and 891*891 dis. opn. of Mosk, J.) (Freeman & Mills )) and the distinction between the remedies for each is not “‘found ready made.'” (Ibid., quoting Holmes, The Common Law (1881) p. 13.) These uncertain boundaries and the apparent breadth of the recovery available for tort actions create pressure to obliterate the distinction between contracts and torts — an expansion of tort law at the expense of contract principles which Grant Gilmore aptly dubbed “contorts.” In this case we consider whether a negligent breach of a contract will support an award of damages for emotional distress — either as tort damages for negligence or as consequential or special contract damages.

    B.

    In concluding emotional distress damages were properly awarded, the Court of Appeal correctly observed that “the same wrongful act may constitute both a breach of contract and an invasion of an interest protected by the law of torts.” (North American Chemical Co. v. Superior Court (1997) 59 Cal.App.4th 764, 774, 69 Cal.Rptr.2d 466, citing 3 Witkin, Cal. Procedure (4th ed. 1996) Actions, § 139, pp. 203-204.) Here, the court permitted plaintiffs to recover both full repair costs as normal contract damages and emotional distress damages as a tort remedy.[1]

    The Court of Appeal also noted that “[a] contractual obligation may create a legal duty and the breach of that duty may support an action in tort.” This is true; however, conduct amounting to a breach of contract becomes tortious only when it also violates a duty independent of the contract arising from principles of tort law. (Applied Equipment, supra, 7 Cal.4th at p. 515, 28 Cal.Rptr.2d 475, 869 P.2d 454.) “` “An omission to perform a contract obligation is never a tort, unless that omission is also an omission of a legal duty.”‘” (Ibid., quoting Jones v. Kelly (1929) 208 Cal. 251, 255, 280 P. 942.)

    Tort damages have been permitted in contract cases where a breach of duty directly causes physical injury (Fuentes v. Perez (1977) 66 Cal.App.3d 163, 168, fn. 2, 136 Cal.Rptr. 275); for breach of the covenant of good faith and fair dealing in insurance contracts (Crisci v. Security Ins. Co. (1967) 66 Cal.2d 425, 433-134, 58 Cal. Rptr. 13, 426 P.2d 173); for wrongful discharge in violation of fundamental public policy (Tameny v. Atlantic Richfield Co. (1980) 27 Cal.3d 167, 175-176, 164 Cal. Rptr. 839, 610 P.2d 1330); or where the contract was fraudulently induced. (Las Palmas Associates v. Las Palmas Center-Associates (1991) 235 Cal.App.3d 1220, 1238-1239, 1 Cal.Rptr.2d 301.) In each of these cases, the duty that gives rise to tort liability is either completely independent of the contract or arises from conduct which is both intentional and intended to harm. (See, e.g., Christensen v. Superior Court(1991) 54 Cal.3d 868, 885-886, 2 Cal. Rptr.2d 79, 820 P.2d 181.)

    Plaintiffs theory of tort recovery is that mental distress is a foreseeable consequence of negligent breaches of standard commercial contracts. However, foreseeability alone is not sufficient to create an independent tort duty. “`Whether a defendant owes a duty of care is a question of law. Its existence depends upon the foreseeability of the risk and a weighing of policy considerations for and against imposition of liability.’ [Citation.]” (Burgess v. Superior Court (1992) 2 Cal.4th 892*892 1064, 1072, 9 Cal.Rptr.2d 615, 831 P.2d 1197.) Because the consequences of a negligent act must be limited to avoid an intolerable burden on society (Elden v. Sheldon (1988) 46 Cal.3d 267, 274, 250 Cal.Rptr. 254, 758 P.2d 582), the determination of duty “recognizes that policy considerations may dictate a cause of action should not be sanctioned no matter how foreseeable the risk.” (Ibid, fn. omitted.) “[T]here are clear judicial days on which a court can foresee forever and thus determine liability but none on which that foresight alone provides a socially and judicially acceptable limit on recovery of damages for [an] injury.” (Thing v. La Chusa (1989) 48 Cal.3d 644, 668, 257 Cal.Rptr. 865, 771 P.2d 814.) In short, foreseeability is not synonymous with duty; nor is it a substitute.

    The question thus remains: is the mere negligent breach of a contract sufficient? The answer is no. It may admittedly be difficult to categorize the cases, but to state the rule succinctly: “[C]ourts will generally enforce the breach of a contractual promise through contract law, except when the actions that constitute the breach violate a social policy that merits the imposition of tort remedies.” (Freeman & Mills, supra, 11Cal.4th at p. 107, 44 Cal.Rptr.2d 420, 900 P.2d 669 (cone, and dis. opn. of Mosk, J.).) The familiar paradigm of tortious breach of contract in this state is the insurance contract. There we relied on the covenant of good faith and fair dealing, implied in every contract, to justify tort liability. (Foley, supra, 47 Cal.3d at pp. 689-690, 254 Cal.Rptr. 211, 765 P.2d 373.) In holding that a tort action is available for breach of the covenant in an insurance contract, we have “emphasized the `special relationship’ between insurer and insured, characterized by elements of public interest, adhesion, and fiduciary responsibility.” (Freeman & Mills, supra, 11 Cal.4th at p. 91, 44 Cal.Rptr.2d 420, 900 P.2d 669; see Louderback & Jurika, Standards for Limiting the Tort of Bad Faith Breach of Contract (1982) 16 U.S.F. L.Rev. 187, 227.)

    The special relationship test, which has been criticized as illusory and not sufficiently precise (Putz & Klippen, Commercial Bad Faith: Attorneys Fees—Not Tort Liability—Is the Remedy for “Stonewalling” (1987) 21 U.S.F. L.Rev. 419, 478-479), has little relevance to the question before us. Menezes is in the business of building single-family homes. He is one among thousands of contractors who provide the same service, and the Erlichs could take their choice among any contractors willing to accept work in the area where their home would be constructed. Although they undoubtedly relied on his claimed expertise, they were in a position to view, inspect, and criticize his work, or to hire someone who could. Most significantly, there is no indication Menezes sought to frustrate the Erlichs’ enjoyment of contracted-for benefits. He did build a house. His ineptitude led to numerous problems which he attempted to correct. And he remains ultimately responsible for reimbursing the cost of doing the job properly.

    Moreover, since, as Foley noted, the insurance cases represented “a major departure from traditional principles of contract law,” any claim for automatic extension of that exceptional approach whenever “certain hallmarks and similarities can be adduced in another contract setting” should be carefully considered. (Foley, supra, 47 Cal.3d at p. 690, 254 Cal.Rptr. 211, 765 P.2d 373.)

    Our previous decisions detail the reasons for denying tort recovery in contract breach cases: the different objectives underlying tort and contract breach; the importance of predictability in assuring commercial stability in contractual dealings; the potential for converting every contract breach into a tort, with accompanying punitive damage recovery, and the preference for legislative action in affording appropriate remedies. (Freeman & Mills, supra, 11 Cal.4th at p. 98, 44 Cal. Rptr.2d 420, 900 P.2d 669, citing approvingly 893*893 Harris v. Atlantic Richfield Co. (1993) 14 Cal.App.4th 70, 81-82, 17 Cal. Rptr.2d 649.) The same concerns support a cautious approach here. Restrictions on contract remedies serve to protect the “`freedom to bargain over special risks and [to] promote contract formation by limiting liability to the value of the promise.’ “(11 Cal.4th at p. 98, 44 Cal.Rptr.2d 420, 900 P.2d 669,quoting Harris, supra, 14 Cal.App.4th at p. 77, 17 Cal.Rptr.2d 649.)

    Generally, outside the insurance context, “a tortious breach of contract … may be found when (1) the breach is accompanied by a traditional common law tort, such as fraud or conversion; (2) the means used to breach the contract are tortious, involving deceit or undue coercion or; (3) one party intentionally breaches the contract intending or knowing that such a breach will cause severe, unmitigable harm in the form of mental anguish, personal hardship, or substantial consequential damages.” (Freeman & Mills, supra, 11 Cal.4th at p. 105, 44 Cal.Rptr.2d 420, 900 P.2d 669(cone, and dis. opn. of Mosk, J.).) Focusing on intentional conduct gives substance to the proposition that a breach of contract is tortious only when some independent duty arising from tort law is violated. (Applied Equipment, supra, 7 Cal.4th at p. 515, 28 Cal.Rptr.2d 475, 869 P.2d 454.) If every negligent breach of a contract gives rise to tort damages the limitation would be meaningless, as would the statutory distinction between tort and contract remedies.

    In this case, the jury concluded Menezes did not act intentionally; nor was he guilty of fraud or misrepresentation. This is a claim for negligent breach of a contract, which is not sufficient to support tortious damages for violation of an independent tort duty.

    It may ultimately be more useful, in attempting to develop a common law of tortious breach, to affirmatively identify specific practices utilized by contracting parties that merit the imposition of tort remedies (Freeman & Mills, supra, 11 Cal.4th at p. 107, 44 Cal.Rptr.2d 420, 900 P.2d 669 (cone, and dis. opn. of Mosk, J.)) instead of comparing each new claim to a template for exceptions. In the interim, however, it is sufficient to note that more than mere negligence has been involved in each case where tort damages have been permitted. The benefits of broad compensation must be balanced against the burdens on commercial stability. “[C]ourts should be careful to apply tort remedies only when the conduct in question is so clear in its deviation from socially useful business practices that the effect of enforcing such tort duties will be … to aid rather than discourage commerce.” (Freeman & Mills, supra, 11Cal.4th at p. 109, 44 Cal.Rptr.2d 420, 900 P.2d 669 (cone, and dis. opn. of Mosk, J.).)

    C.

    Even assuming Menezes’s negligence constituted a sufficient independent duty to the Erlichs, such a finding would not entitle them to emotional distress damages on these facts. “The fact that emotional distress damages may be awarded in some circumstances (see Rest.2d Torts, § 905, pp. 456-57) does not mean they are available in every case in which there is an independent cause of action founded upon negligence.” (Merenda v. Superior Court (1992) 3 Cal.App.4th 1, 7, 4 Cal. Rptr.2d 87 (Merenda).) “No California case has allowed recovery for emotional distress arising solely out of property damage” (Cooper v. Superior Court (1984) 153 Cal.App.3d 1008, 1012, 200 Cal.Rptr. 746); moreover, a preexisting contractual relationship, without more, will not support a recovery for mental suffering where the defendant’s tortious conduct has resulted only in economic injury to the plaintiff. (Smith v. Superior Court (1992) 10 Cal. App.4th 1033, 1040, fn. 1, 13 Cal.Rptr.2d 133; Mercado v. Leong (1996) 43 Cal. App.4th 317, 324, 50 Cal.Rptr.2d 569[emotional distress damages are unlikely when 894*894 the interests affected are merely economic]; Camenisch v. Superior Court (1996) 44 Cal.App.4th 1689, 1691, 52 Cal.Rptr.2d 450 (Camenisch) [emotional distress damages are not recoverable when attorney malpractice leads only to economic loss].)

    Although the Court of Appeal, plaintiffs, and their amici curiae rely substantially onPotter v. Firestone Tire & Rubber Co. (1993) 6 Cal.4th 965, 25 Cal.Rptr.2d 550, 863 P.2d 795 (Potter), that case does not assist our inquiry. Potter, a toxic tort case, is readily distinguishable. First, the analysis there was narrowly circumscribed by the issue presented: “whether … emotional distress engendered by the fear of developing cancer in the future as a result of a toxic exposure is a recoverable item of damages in a negligence action.” (Id. at p. 981, 25 Cal.Rptr.2d 550, 863 P.2d 795.) Thus, the language of Potter cannot be read in support of some larger proposition affording emotional distress damages for any other type of fear of future harm in actions involving negligent breach of contract.

    Second, the water supply of the plaintiffs in Potter had already been contaminated. The prolonged exposure could not be undone. In contrast, the Erlichs could have avoided the threatened injury by moving out of the house until necessary repairs had been completed. If they had, relocation expenses would have been part of their damages. In any event, the general measure of damages where injury to property is capable of being repaired is the reasonable cost of repair together with the value of lost use during the period of injury. (6 Witkin, Summary of Cal. Law (9th ed. 1988) Torts, § 1462, pp. 934-935.)

    In short, Potter permitted recovery, within stringent limits, for emotional distress resulting from a personal injury directly caused by the defendant’s tortious conduct. The Erlichs seek recovery for emotional distress engendered by an injury to their property.

    To the extent Potter is relevant here, it reiterates that “unless the defendant has assumed a duty to plaintiff in which the emotional condition of the plaintiff is an object, recovery is available only if the emotional distress arises out of the defendant’s breach of some other legal duty and the emotional distress is proximately caused by [breach of the independent duty]. Even then, with rare exceptions, a breach of the duty must threaten physical injury, not simply damage to property or financial interests. [Citations.]” (Potter, supra, 6 Cal.4th at p. 985, 25 Cal.Rptr.2d 550, 863 P.2d 795.) Although the Erlichs feared physical injury, Menezes’s negligent breach of contract resulted in only damage to their property, and they could have avoided any threat of harm.

    The question was thoroughly explored in Merenda, supra, 3 Cal.App.4th 1, 4 Cal. Rptr.2d 87, a legal malpractice action in which the plaintiff sought damages for the severe emotional distress she suffered when her attorney’s negligence caused the loss of expected damages from her claim for sexual assault and battery. “It is true that the `transaction,’ a contract for legal services, was intended to affect the plaintiff. However, the foreseeability of serious emotional harm to the client and the degree of certainty that the client suffered such injury by loss of an economic claim are tenuous. Litigation is an inherently uncertain vehicle for advancing one’s economic interests. The expectation of a recovery is rarely so certain that a litigant would be justified in resting her peace of mind upon the assurance of victory.” (Id. at p. 10, 4 Cal.Rptr.2d 87.)

    In Camenisch, supra, 44 Cal.App.4th 1689, 52 Cal.Rptr.2d 450, the plaintiff sought emotional distress damages because the lawyer’s negligent estate planning advice thwarted his tax avoidance goals. The complaint alleged the attorney had been hired “`for the express purpose of providing for [the plaintiffs’ family] and obtaining repose regarding their financial 895*895 security.'” (Id. at p. 1692, 52 Cal.Rptr.2d 450.) The trial court overruled the attorney’s demurrer. The Court of Appeal rejected the claim for emotional distress damages. Acknowledging that Merenda dealt with malpractice related to litigation, the court nevertheless found its reasoning dispositive. “Public policy reasons do not support a different result when the alleged malpractice is committed in a tax advice context, even if the tax advice is part of an estate plan, [¶] As in a litigation context, the client’s primary protected interest is economic in a tax planning situation. The prospect of paying taxes is generally considered distressing, and the prospect of paying a greater levy than necessary is even more disquieting. However, the emotional upset derives from an inherently economic concern.” (Id. at p. 1697, 52 Cal.Rptr.2d 450.)

    In Lubner v. City of Los Angeles (1996) 45 Cal.App.4th 525, 53 Cal.Rptr.2d 24, two artists lost a substantial portion of their life’s work when a city trash truck, which had been parked on a hilltop, rolled down and crashed into their home, damaging the house, two cars, and much of their artwork. The Lubners filed a negligence action and sought damages for their emotional distress. Recognizing that the artwork may have been extremely important to the Lubners, the court nevertheless found they were not entitled to recover for emotional distress caused by injury to property. (Id. at p. 532, 53 Cal.Rptr.2d 24.) The court based its ruling primarily on the absence of a preexisting relationship between the parties, but separately considered whether the defendant breached a duty of care to the plaintiffs. Noting that the moral blame on the defendant was only that which attends ordinary negligence and nothing in the record indicated bad faith or reckless indifference to the Lubners’ emotional tranquillity, the court concluded liability for negligent infliction of emotional distress was unwarranted. (Id. at p. 534, 53 Cal.Rptr.2d 24.)

    Public policy supports a similar limit where the negligence concerns the construction of a home. In Blagrove v. J.B. Mechanical, Inc. (Wyo.1997) 934 P.2d 1273 (Blagrove), the homeowners sued a plumbing contractor to recover damages for mental anguish caused when flooding from a faulty plumbing connection damaged their home and destroyed personal possessions. The Wyoming Supreme Court held that, absent physical injury, emotional distress damages can be recovered only in limited circumstances involving intentional torts, constitutional violations, and the breach of the covenant of good faith and fair dealing in insurance contracts, and concluded a contrary rule would be poor public policy.

    “In deciding whether the plaintiffs interests are entitled to legal protection against the defendant’s conduct, we must balance the interest of the injured parties against the view that a negligent act should have some end to its legal consequences…. We are persuaded that the concerns which have acted to prevent recovery for emotional distress when property is damaged remain relevant and weigh against permitting recovery. While we do not doubt that the Blagroves were justifiably and seriously distressed over the damage to [their home], adopting a rule allowing trial on the issue and recovery if proved would result in unacceptable burdens for both the judicial system and defendants. We therefore hold that emotional distress damages in connection with property damages are not compensable.” (Blagrove, supra, 934 P.2d at pp. 1276-1277; see also Caradonna v. Thorious (1969) 17 Mich.App. 41, 169 N.W.2d 179, 182; Jankowski v. Mazzotta (1967) 7 Mich. App. 483, 152 N.W.2d 49, 51 [no mental anguish remedy available for ineptly constructed home].)

    Here, the breach — the negligent construction of the Erlichs’ house — did not cause physical injury. No one was hit by a falling beam. Although the Erlichs state they feared the house was structurally unsafe 896*896 and might collapse in an earthquake, they lived in it for five years. The only physical injury alleged is Barry Erlich’s heart disease, which flowed from the emotional distress and not directly from the negligent construction.

    The Erlichs may have hoped to build their dream home and live happily ever after, but there is a reason that tag line belongs only in fairy tales. Building a house may turn out to be a stress-free project; it is much more likely to be the stuff of urban legends — the cause of bankruptcy, marital dissolution, hypertension and fleeting fantasies ranging from homicide to suicide. As Justice Yegan noted below, “No reasonable homeowner can embark on a building project with certainty that the project will be completed to perfection. Indeed, errors are so likely to occur that few if any homeowners would be justified in resting their peace of mind on [its] timely or correct completion….” The connection between the service sought and the aggravation and distress resulting from incompetence may be somewhat less tenuous than in a malpractice case, but the emotional suffering still derives from an inherently economic concern.

    D.

    Having concluded tort damages are not available, we finally consider whether damages for emotional distress should be included as consequential or special damages in a contract claim. “Contract damages are generally limited to those within the contemplation of the parties when the contract was entered into or at least reasonably foreseeable by them at the time; consequential damages beyond the expectations of the parties are not recoverable. [Citations.] This limitation on available damages serves to encourage contractual relations and commercial activity by enabling parties to estimate in advance the financial risks of their enterprise.” (Applied Equipment, supra, 7 Cal.4th at p. 515, 28 Cal.Rptr.2d 475, 869 P.2d 454.)

    “`[W]hen two parties make a contract, . they agree upon the rules and regulations which will govern their relationship; the risks inherent in the agreement and the likelihood of its breach. The parties to the contract in essence create a mini-universe for themselves, in which each voluntarily chooses his contracting partner, each trusts the other’s willingness to keep his word and honor his commitments, and in which they define their respective obligations, rewards and risks. Under such a scenario, it is appropriate to enforce only such obligations as each party voluntarily assumed, and to give him only such benefits as he expected to receive; this is the function of contract law.'” (Applied Equipment, supra, 7 Cal.4th at p. 517, 28 Cal.Rptr.2d 475, 869 P.2d 454.)

    Accordingly, damages for mental suffering and emotional distress are generally not recoverable in an action for breach of an ordinary commercial contract in California. (Kwan v. Mercedes-Benz of North America, Inc. (1994) 23 Cal.App.4th 174, 188, 28 Cal.Rptr.2d 371 (Kwan); Sawyer v. Bank of America (1978) 83 Cal.App.3d 135, 139, 145 Cal.Rptr. 623.) “Recovery for emotional disturbance will be excluded unless the breach also caused bodily harm or the contract or the breach is of such a kind that serious emotional disturbance was a particularly likely result.” (Rest.2d Contracts, § 353.) The Restatement specifically notes the breach of a contract to build a home is not “particularly likely” to result in “serious emotional disturbance.” (Ibid.)

    Cases permitting recovery for emotional distress typically involve mental anguish stemming from more personal undertakings the traumatic results of which were unavoidable. (See, e.g., Burgess v. Superior Court, supra, 2 Cal.4th 1064, 9 Cal.Rptr.2d 615, 831 P.2d 1197 [infant injured during childbirth]; Molien v. Kaiser Foundation Hospitals (1980) 27 Cal.3d 916, 167 Cal.Rptr. 831, 616 P.2d 813[misdiagnosed venereal disease and subsequent 897*897 failure of marriage]; Kately v. Wilkinson (1983) 148 Cal.App.3d 576, 195 Cal.Rptr. 902 [fatal water skiing accident];Chelini v. Nieri (1948) 32 Cal.2d 480, 196 P.2d 915 [failure to adequately preserve a corpse].) Thus, when the express object of the contract is the mental and emotional well-being of one of the contracting parties, the breach of the contract may give rise to damages for mental suffering or emotional distress. (See Wynn v. Monterey Club(1980) 111 Cal.App.3d 789, 799-801, 168 Cal.Rptr. 878 [agreement of two gambling clubs to exclude husband’s gambling-addicted wife from clubs and not to cash her checks]; Ross v. Forest Laum Memorial Park (1984) 153 Cal.App.3d 988, 992-996, 203 Cal.Rptr. 468 [cemetery’s agreement to keep burial service private and to protect grave from vandalism]; Windeler v. Scheers Jewelers (1970) 8 Cal.App.3d 844, 851-852, 88 Cal.Rptr. 39 [bailment for heirloom jewelry where jewelry’s great sentimental value was made known to bailee].)

    Cases from other jurisdictions have formulated a similar rule, barring recovery of emotional distress damages for breach of contract except in cases involving contracts in which emotional concerns are the essence of the contract. (See, e.g.,Hancock v. Northcutt (Alaska 1991) 808 P.2d 251, 258 [“contracts pertaining to one’s dwelling are not among those contracts which, if breached, are particularly likely to result in serious emotional disturbance”; typical damages for breach of house construction contracts can appropriately be calculated in terms of monetary loss]; McMeakin v. Roofing & Sheet Metal Supply (Okla.Ct. App.1990) 807 P.2d 288[affirming order granting summary judgment in favor of defendant roofing company after it negligently stacked too many brick tiles on roof, causing roof to collapse and completely destroy home, leading to plaintiffs heart attack one month later]; Day v. Montana Power Company (1990) 242 Mont. 195, 789 P.2d 1224 [owner of restaurant that was destroyed in gas explosion allegedly caused by negligence of utility company employee not entitled to recover damages for emotional distress]; Creger v. Robertson (La.Ct.App.1989) 542 So.2d 1090 [reversing award for emotional distress damages caused by foul odor emanating from a faulty foundation, preventing plaintiff from entertaining guests in her residence]; Groh v. Broadland Builders, Inc.(Mich. Ct.App.1982) 120 Mich.App. 214, 327 N.W.2d 443 [reversing order denying motion to strike allegations of mental anguish in case involving malfunctioning septic tank system, and noting adequacy of monetary damages to compensate for pecuniary loss of “having to do the job over,” as distinguished from cases allowing recovery because situation could never be adequately corrected].)

    Plaintiffs argue strenuously that a broader notion of damages is appropriate when the contract is for the construction of a home. Amici curiae urge us to permit emotional distress damages in cases of negligent construction of a personal residence when the negligent construction causes gross interference with the normal use and habitability of the residence.

    Such a rule would make the financial risks of construction agreements difficult to predict. Contract damages must be clearly ascertainable in both nature and origin. (Civ.Code, § 3301.) A contracting party cannot be required to assume limitless responsibility for all consequences of a breach and must be advised of any special harm that might result in order to determine whether or not to accept the risk of contracting. (1 Witkin, Summary of Cal. Law, supra, Contracts, § 815, p. 733.)

    Moreover, adding an emotional distress component to recovery for construction defects could increase the already prohibitively high cost of housing in California, affect the availability of insurance for builders, and greatly diminish the supply of affordable housing. The potential for such broad-ranging economic consequences — costs likely to be paid by the public generally — means the task of fashioning 898*898appropriate limits on the availability of emotional distress claims should be left to the Legislature. (See Tex. Prop.Code Ann. § 27.001 et seq. (1999); Hawaii Rev. Stat. § 663-8.9 (1998).)

    Permitting damages for emotional distress on the theory that certain contracts carry a lot of emotional freight provides no useful guidance. Courts have carved out a narrow range of exceptions to the general rule of exclusion where emotional tranquillity is the contract’s essence. Refusal to broaden the bases for recovery reflects a fundamental policy choice. A rule which focuses not on the risks contracting parties voluntarily assume but on one party’s reaction to inadequate performance, cannot provide any principled limit on liability.

    The discussion in Kwan, a case dealing with the breach of a sales contract for the purchase of a car, is instructive. “[A] contract for [the] sale of an automobile is not essentially tied to the buyer’s mental or emotional well-being. Personal as the choice of a car may be, the central reason for buying one is usually transportation…. [¶] In spite of America’s much-discussed `love affair with the automobile,’ disruption of an owner’s relationship with his or her car is not, in the normal case, comparable to the loss or mis-treatment of a family member’s remains [citation], an invasion of one’s privacy [citation], or the loss of one’s spouse to a gambling addiction [citation]. In the latter situations, the contract exists primarily to further or protect emotional interests; the direct and foreseeable injuries resulting from a breach are also primarily emotional. In contrast, the undeniable aggravation, irritation and anxiety that may result from [the] breach of an automobile warranty are secondary effects deriving from the decreased usefulness of the car and the frequently frustrating process of having an automobile repaired. While [the] purchase of an automobile may sometimes lead to severe emotional distress, such a result is not ordinarily foreseeable from the nature of the contract.” (Kwan, supra, 23 Cal. App.4th at p. 190, 28 Cal.Rptr.2d 371.)

    Most other jurisdictions have reached the same conclusion. (See Sanders v. Zeagler(La.1997) 686 So.2d 819, 822-823 [principal object of a contract for the construction of a house was to obtain a place to live and emotional distress damages were not recoverable]; Hancock v. Northcutt, supra, 808 P.2d at pp. 258-259 [no recovery for emotional distress as a result of defective construction; typical damages for breach of house construction contracts can appropriately be calculated in terms of monetary loss]; City of Tyler v. Likes (Tex.1997) 962 S.W.2d 489, 497 [mental anguish based solely on property damage is not compensable as a matter of law].)

    We agree. The available damages for defective construction are limited to the cost of repairing the home, including lost use or relocation expenses, or the diminution in value. (Orndorff v. Christiana Community Builders (1990) 217 Cal. App.3d 683, 266 Cal.Rptr. 193.) The Erlichs received more than $400,000 in traditional contract damages to correct the defects in their home. While their distress was undoubtedly real and serious, we conclude the balance of policy considerations — the potential for significant increases in liability in amounts disproportionate to culpability, the court’s inability to formulate appropriate limits on the availability of claims, and the magnitude of the impact on stability and predictability in commercial affairs — counsel against expanding contract damages to include mental distress claims in negligent construction cases.

    DISPOSITION

    The judgment of the Court of Appeal is reversed and the matter is remanded for further proceedings consistent with this opinion.

    GEORGE, C.J., KENNARD, J., BAXTER, J., and CHIN, J., concur.

    899*899 Concurring and Dissenting Opinion by WERDEGAR, J.

    I concur in the majority opinion insofar as it holds that a plaintiff may not recover damages for emotional distress based on a defendant’s negligent breach of a contract to build a house when the defendant has breached no duty independent of the contract. Although I read the record differently as to whether these plaintiffs did, in fact, present an independent claim for negligence, in view of the majority’s conclusion that plaintiffs did not present such a claim (see maj. opn., ante, 87 Cal.Rptr.2d at pp. 888, 893, 981 P.2d at pp. 980, 984), the discussion in part C of the majority opinion (id., at pp. 893-896, 981 P.2d at pp. 985-987) is unnecessary. I therefore express no opinion on the circumstances under which a tort plaintiff may recover damages for emotional distress.

    MOSK, J., concurs.

    [1] At oral argument, plaintiff cited Sloane v. Southern Cal. Ry. Co. (1896) 111 Cal. 668, 44 P. 320, a case involving a passenger wrongly ejected from a train, for the proposition that emotional distress damages arising out of breach of contract have been permitted in California for many years. In fact,Sloane specifically recognized the distinction between contract and tort remedies and held plaintiff could either “bring an action simply for the breach of . . . contract, or she could sue … in tort” for the carrier’s violation of the duty, as a common carrier, which it assumed upon entering into the contract. (Id. at p. 677. 44 P. 320.)

     

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  • Kriegler v. Eichler Homes

    Kriegler v. Eichler Homes

    269 Cal.App.2d 224 (1969)

    David Freidenrich, Leonard Ware, Eleanor M. Kraft and Kraft & Kraft for Defendants, Cross-complainants and Appellants.

    No appearance for Plaintiff and Respondent.

    Hoge, Fenton, Jones & Appel, James B. Eggert, Whitney & Lariviere and John P. Whitney for Cross-defendants and Respondents.

    TAYLOR, J.

    Respondent Kriegler filed this action for physical damage sustained as the result of the failure of a radiant heating system in a home constructed by appellants, Eichler Homes, Inc. and Joseph L. Eichler (hereafter Eichler), who cross-complained against the supplier, respondent, General Motors Corporation (hereafter General Motors) and the heating contractors, respondents, Anderson and Rother, individually and doing business as Arro Company (hereafter collectively referred to as Arro).Eichler appeals from the judgment in favor of Kriegler on the complaint and in favor of General Motors and Arro on the cross-complaint.

    The questions presented are: 1) whether Eichler was liable to Kriegler on the theory of strict liability; 2) the sufficiency of the evidence to sustain the judgment in favor of Kriegler on the basis of Eichler’s negligence in installing the radiant heating system; and 3) the propriety of the trial court’s conclusions that General Motors and Arro were not liable to Eichler for breach of any implied warranties and that, in any event, recovery on the cross-complaint was barred by Eichler’s negligence.

    The basic facts are not in dispute. In April 1957 Kriegler purchased a home in Palo Alto that had been constructed by Eichler in the last quarter of 1951 and sold to Kriegler’s predecessors, the Resings, in January 1952. Eichler employed Arro as the heating contractor. Because of a copper shortage caused by the Korean war, Arro obtained terne coated steel tubing from General Motors. In the fall of 1951, Arro installed this steel tubing in the Kriegler home and guaranteed the radiant heating system in writing. Arro installed steel 226*226 tubing radiant heating systems in at least 4,000 homes for Eichler.

    The method used to install the steel tubing was the same as that used for copper. After Eichler prepared the building site by providing a four-inch fill covered with a vapor-proof membrane of Sisal-Kraft paper and putting a net of steel mesh over the paper, Arro shaped the tubing, laid it on the mesh and tied it to the mesh. Then, Arro pumped the piping up to the hydrostatic pressure of not less than 250 and generally to 300, put a guage on it and left it for the approval of the city and the Federal Housing Administration inspectors (hereafter F.H.A.). After a hydrostatic pressure check by these inspectors, Eichler or its other subcontractors poured the concrete with the pressure gauge still operating, while the workers lifted the wire mesh and tubing up into the concrete with hooks. The objective of this process was to place the tubing into the center of the concrete slab to insure optimum heat distribution.

    At this time, F.H.A. required either a double slab or use of a membrane with a single slab, and had approved both the above method of installation and the use of General Motors steel tubing.

    In November 1959, as a result of the corrosion of the steel tubing, the radiant heating system of the Kriegler home failed. The emergency and final repairs required removal and storage of furniture, as well as the temporary acquisition by Krieglerand his family of other shelter. When Arro first attempted to repair the system, it discovered that the tubing was corroded from the outside. Arro first attempted to splice in a new pipe but after the system continued to leak, concluded that the tubing was probably corroded throughout and replaced the entire heating system with a new one.

    The trial court found on the complaint, so far as pertinent, that: as a result ofEichler’s negligence, Kriegler’s home suffered a diminution in value of $5,073.18; and that regardless of negligence, Eichler was liable to Kriegler in the above amount on the theory of strict liability because the radiant heating system, as installed, was defective.

    [1] Eichler first contends that the trial court erred in finding Eichler liable to Krieglerregardless of negligence. The question is one of first impression in this state. Although Kriegler has not filed any brief and we are under no duty to look up the law (Roth v. Keene, 256 Cal.App.2d 725, 727 [64 Cal.Rptr. 399]; Cal. Rules of Court, rule 17 (b)), Eichler still 227*227 has the burden of demonstrating error (Perfection Paint Products v. Johnson, 164 Cal.App.2d 739 [330 P.2d 829]).

    Eichler concedes that the doctrine of strict liability in tort applies to physical harm to property (Gherna v. Ford Motor Co., 246 Cal.App.2d 639, 649 [55 Cal.Rptr. 94]) but argues that the doctrine cannot be applied to homes or builders. We do not agree. As set forth in Greenman v. Yuba Power Products, Inc., 59 Cal.2d 57 [27 Cal.Rptr. 697, 377 P.2d 897, 13 A.L.R.3d 1049], and Vandermark v. Ford Motor Co., 61 Cal.2d 256 [37 Cal.Rptr. 896, 391 P.2d 168], the strict liability doctrine applies when the plaintiff proves that he was injured while using the instrumentality in a way it was intended to be used as a result of a defect in design and manufacture of which plaintiff was not aware and which made the instrumentality unsafe for its intended use. So far, it has been applied in this state only to manufacturers, retailers and suppliers of personal property and rejected as to sales of real estate (Conolley v. Bull, 258 Cal.App.2d 183, 195 [65 Cal.Rptr. 689]). We recently pointed out in Barth v. B. F. Goodrich Tire Co., 265 Cal.App.2d 228, at pp. 252-253 [71 Cal.Rptr. 306], that the reasoning behind the doctrine applies to any case of injury resulting from the risk-creating conduct of a seller in any stage of the production and distribution of goods.

    We think, in terms of today’s society, there are no meaningful distinctions betweenEichler’s mass production and sale of homes and the mass production and sale of automobiles and that the pertinent overriding policy considerations are the same. Law, as an instrument of justice, has infinite capacity for growth to meet changing needs and mores. Nowhere is this better illustrated than in the recent developments in the field of products liability. The law should be based on current concepts of what is right and just and the judiciary should be alert to the never-ending need for keeping legal principles abreast of the times. Ancient distinctions that make no sense in today’s society and that tend to discredit the law should be readily rejected as they were step by step in Greenman and Vandermark.

    We find support in our view in the comments of our most eminent authority in the law of torts (see Prosser, Strict Liability to the Consumer in California, 18 Hastings L.J., 9, 20, and the exceptionally able and well-thought out opinion of the Supreme Court of New Jersey, in a case almost on all fours with the instant one (Schipper v. Levitt & Sons, Inc. (1965) 228*228 44 N.J. 70 [207 A.2d 314]). [fn. 1] In Schipper, the purchaser of a mass-produced home sued the builder-vendor for injuries sustained by the child of a lessee. The child was injured by excessively hot water drawn from a faucet in a hot water system that had been installed without a mixing valve, a defect as latent as the incorrect positioning of the pipes in the instant case. In reversing a judgment of nonsuit, the Supreme Court held that the builder-vendor was liable to the purchaser on the basis of strict liability. In language equally applicable here, the court said: “When a vendee buys a development house from an advertised model, as in a Levitt or in a comparable project, he clearly relies on the skill of the developer and on its implied representation that the house will be erected in reasonably workmanlike manner and will be reasonably fit for habitation. He has no architect or other professional adviser of his own, he has no real competency to inspect on his own, his actual examination is, in the nature of things, largely superficial, and his opportunity for obtaining meaningful protective changes in the conveyancing documents prepared by the builder vendor is negligible. If there is improper construction such as a defective heating system or a defective ceiling, stairway and the like, the well-being of the vendee and others is seriously endangered and serious injury is foreseeable. The public interest dictates that if such injury does result from the defective construction, its cost should be borne by the responsible developer who created the danger and who is in the better economic position to bear the loss rather than by the injured party who justifiably relied on the developer’s skill and implied representation.” (Pp. 325-326.)

    “Buyers of mass produced development homes are not on an equal footing with the builder vendors and are no more able to protect themselvs in the deed than are automobile purchasers in a position to protect themselves in the bill of sale.” (P. 326.) The court then pointed out that the imposition of strict liability principles on builders and developers would not make them insurers of the safety of all who thereafter came on the premises. In determining whether the house was defective, the test would be one of reasonableness rather than perfection.

    As it cannot be disputed that Kriegler here relied on the skill of Eichler in producing a home with a heating system 229*229 that was reasonably fit for its intended purpose, the trial court properly concluded that Eichler was liable to Kriegler on the basis of strict liability, and the judgment in favor of Kriegler must be affirmed on that ground alone.

    [2] Since we have concluded above that a sufficient basis appears for sustaining the judgment in favor of Kriegler, we will only briefly discuss Eichler’s remaining contention in relation to that judgment. Eichler contends that the evidence does not support the findings concerning its negligence in the installation of the heating system. The detailed findings are set forth in the footnote below. [fn. 2]

    As Kriegler has not seen fit to file a brief in this case, we assume that: 1) the facts as stated in Eichler’s brief are true; 2) the evidence is insufficient to support material findings of the trial court; and 3) Kriegler has abandoned any attempt to support the judgment and the ground urged by Eichler for reversing the judgment is meritorious (Roth v. Keene, supra).

    Applying the above rule, we assume that the evidence is insufficient to support the findings concerning Eichler’s negligence in the installation of the heating system. Accordingly, the findings and conclusions declaring Eichler’s negligence are hereby stricken, and the judgment in favor of Kriegler otherwise affirmed.

    [3] We turn then to Eichler’s appeal from that portion of the judgment denying relief on its cross-complaint against General Motors and Arro. As indicated above, the trial court found as to General Motors that the steel tubing was suitable for such use if properly installed, that there was no breach of the implied warranties of fitness for intended use or merchantability, and that there were no express warranties. As to Arro, the court found there was an express warranty for five years but that no implied warranties were made. The court also found that Arro did not breach its express warranty but 230*230 that the damages were caused by Eichler’s negligence in positioning the heating system.

    Eichler complains only of the findings relating to implied warranty, and the further superfluous finding that in any event, Eichler was barred from any recovery on its cross-complaint because of its negligence. Eichler does not attack the sufficiency of the evidence [fn. 3] as to the findings that no implied warranties were breached by General Motors or Arro, but only states that the trial court failed to indicate whether General Motors made any implied warranties of fitness as to the tubing. This contention borders on the frivolous, as implied warranties are created by operation of law.

    The uncontroverted evidence established that the steel tubing was sold by General Motors to Arro in May 1951. The applicable provision of law at this time was section 1735 of the Civil Code (set forth below). [fn. 4]

    This section imposes an absolute liability regardless of negligence (Vaccarezza v. Sanguinetti, 71 Cal.App.2d 687 [163 P.2d 470]) and in a similar situation has been held to include a prospective warranty that tubing would not, within a reasonable period of time, corrode and leak (Aced v. Hobbs-Sesack Plumbing Co., 55 Cal.2d 573, 583-585 [12 Cal.Rptr. 257, 360 P.2d 897]). We must assume that the trial court was familiar with these rules and based its conclusions of non-liability on the evidence presented. Accordingly, the judgment 231*231 in favor of Arro and General Motors on the cross-complaint is affirmed. As Eichler failed to establish a cause of action on its cross-complaint, we need not discuss the contentions concerning the finding that it was barred from any relief on the cross-complaint by its own negligence.

    Affirmed.

    Shoemaker, P. J., and Agee, J., concurred.

    “(1) Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required, and it appears that the buyer relies on the seller’s skill or judgment (whether he be the grower or manufacturer or not), there is an implied warranty that the goods shall be reasonably fit for such purpose.”

    “(2) Where the goods are bought by description from a seller who deals in goods of that description (whether he be the grower or manufacturer or not), there is an implied warranty that the goods shall be of merchantable quality.”

    “(3) If the buyer has examined the goods, there is no implied warranty as regards defects which such examination ought to have revealed.”

    “(4) In the case of a contract to sell or a sale of a specified article under its patent or other trade name, there is no implied warranty as to its fitness for any particular purpose.”

    “(5) An implied warranty or condition as to the quality or fitness for a particular purpose may be annexed by the usage of trade.”

    “(6) An express warranty or condition does not negative a warranty or condition implied under this act unless inconsistent therewith.”

    [fn. 1] 1. Cited with approval in Connor v. Great Western Sav. & Loan Assn. (1968) 69 Cal.2d 850 [73 Cal.Rptr. 369, 447 P.2d 609], which, although not directly in point, supports our view.

    [fn. 2] 2. The court found that at the time of the installation of the heating system in the Kriegler home, the building and construction industry had knowledge of methods whereby steel tubing could be used as a substitute for copper tubing with reasonable protection against corrosion. An essential element in such methods was the control positioning of the tubing well within the cement slab. Because of the susceptibility to the rust and corrosion in such steel tubing, it was good practice in the building and construction industry, both as to custom homes and tract developments, to take precautions to insure controlled and uniform positioning of the tubing well within the concrete slab. This was usually accomplished by other builders of custom and tract homes through the use of (1) double slab construction, (2) concrete blocks, or (3) wire clips. Eichler was negligent in not using any of these methods then known and used in the industry.

    [fn. 3] 3. Accordingly, as to the appeal from the judgment on the cross-complaint, the usual assumptions concerning the sufficiency of the evidence to support the findings and judgment apply.

    [fn. 4] 4. “Subject to the provisions of this act and of any statute in that behalf, there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract to sell or a sale, except as follows:

     

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  • Palm Valley HOA v. Design

    Palm Valley HOA v. Design

    102 Cal.Rptr.2d 350 (2000)

    351*351 Edwards, Sooy & Byron and Michael M. Edwards, San Diego, for Objector and Appellant.

    Thorsnes, Bartolotta & McGuire, C. Brant Noziska, Neal H. Rockwood and Timothy J. Tatro, San Diego, for Plaintiff and Respondent.

    352*352 OPINION

    WARD, J.

    Appellant law firm Edwards, Sooy & Byron (the firm) appeals after the trial court imposed sanctions upon it for asserted bad faith acts and Discovery abuses in the underlying construction defect litigation. The basis for the imposition of sanctions was that the firm pursued litigation activities on behalf of its client, even after the firm knew that the client was a suspended corporation.

    The firm contends that the trial court abused its discretion in imposing sanctions: The rule is clear that a corporation suspended for nonpayment of taxes may not defend itself in litigation. The firm’s client, however, was suspended for failure to file a required information statement with the Secretary of State, and not for nonpayment of taxes. Whether these two types of corporate suspensions both result in a disqualification from litigation appears to be a question of first impression.

    We conclude that, although the statutory provisions suspending a corporation for failure to file a required statement have not yet been so construed in any published California case, those provisions would make clear to any reasonable attorney that a corporation suspended under the Corporations Code, like a corporation suspended under the Revenue and Taxation Code, is also disabled from participating in litigation activities. At the least, the facts before the trial court support the view that the firm did not rely upon any purported distinction between a Corporations Code suspension and a Revenue and Taxation Code suspension in deciding to conceal its knowledge of the client’s suspended status from the court and opposing counsel. Thus, the court did not abuse its discretion in finding that the firm acted in bad faith, and in assessing sanctions accordingly. We therefore affirm the award of sanctions.

    FACTS AND PROCEDURAL HISTORY

    Plaintiff and respondent, Palm Valley Homeowners Association, Inc. (homeowners), filed a construction defect lawsuit against the developer of their homes. The developer in turn cross-complained against subcontractors and suppliers that had worked on the project. In 1996, homeowners named a company called Design MTC in place of one of the subcontractor Doe defendants. The firm represented Design MTC.

    The firm, on behalf of Design MTC, answered both the developer’s cross-complaint and the homeowners’ complaint by June 16, 1997. In March of 1998, the firm learned that its client, Design MTC, was a suspended corporation. Design MTC’s suspension was not for nonpayment of taxes, however, as provided under Revenue and Taxation Code section 23301; rather, Design MTC was suspended after failing to file a required informational statement with the Secretary of State, as provided in Corporations Code section 2205.

    The firm did not report the suspension to the court or to any other parties; the firm continued to represent Design MTC in the litigation, filing and responding to pleadings and motions. In July 1998, for example, the firm filed motions for summary judgment on Design MTC’s behalf, against both the homeowners on the complaint and the developer on its cross-complaint.

    On August 5, 1998, the homeowners’ investigator discovered that Design MTC was a suspended corporation. The homeowners’ attorneys notified the firm on August 27, 1998, that it had learned of Design MTC’s suspension. At a court hearing on August 28, 1998, the homeowners’ attorneys reported to the court that Design MTC was a suspended corporation, erroneously stating that it had been suspended under the Revenue and Taxation Code. The court granted the homeowners an order shortening time for bringing a motion to strike Design MTC’s answer, and also 353*353took Design MTC’s summary judgment motions off calendar.

    Homeowners moved for sanctions against Design MTC and the firm. The firm appeared for Design MTC at the sanctions hearing, and objected to the proceedings. The court ruled that neither Design MTC nor the firm had the right to appear at the hearing on account of Design MTC’s suspended status. The court granted the motion for sanctions and set a further date for a prove-up hearing.

    On or about September 25, 1998, homeowners filed their memorandum of costs, and requested $89,490.02 in sanctions. On or about September 29, 1998, the firm filed a petition for writ of mandate in this court. (Edwards, Sooy & Byron v. Superior Court(Sept. 29, 1998, E023496) [nonpub].) On October 5, 1998, this court stayed proceedings on the sanctions. We thereafter issued a writ commanding the trial court to vacate its earlier sanctions order, and to hold a new hearing, affording the firm both notice and an opportunity to appear and defend itself against the request for sanctions. At the firm’s request, we have taken judicial notice of our file in the earlier writ proceeding, Edwards, Sooy & Byron v. Superior Court, supra.

    On December 4, 1998, the court again heard the homeowners’ motion for sanctions. The firm opposed the motion, arguing that, because Design MTC was not suspended for nonpayment of taxes, the disabilities applicable to a tax-suspended corporation (Rev. & Tax.Code, § 23301) should not apply. The firm argued that it had believed in good faith that a suspension under the Corporations Code did not impose the same litigation disabilities as a tax suspension.

    The court took the matter under submission and, on February 3, 1999, ruled that the firm had violated both Code of Civil Procedure sections 128.5 (frivolous actions taken in bad faith) and 2023 (discovery abuses), and imposed sanctions of $14,241.35.

    The firm appeals the sanctions order.

    ANALYSIS

    I. Standard of Review

    “We review the imposition of monetary sanctions for a prejudicial abuse of discretion.” (20th Century Ins. Co. v. Choong (2000) 79 Cal.App.4th 1274, 1277, 94 Cal.Rptr.2d 753.)

    II. The Trial Court Did Not Abuse Its Discretion in Imposing Sanctions on the Firm for Continuing to Represent a Suspended Corporation

    The firm argues that the trial court abused its discretion in imposing sanctions. There are two prongs to the argument.

    First, sanctions were imposed in part under Code of Civil Procedure section 128.5, for alleged bad faith acts, which were frivolous or undertaken for delay. The firm contends that its client was suspended under the Corporations Code, and not under the Revenue and Taxation Code for nonpayment of taxes. The statutory suspension provisions of the Corporations Code have never been interpreted expressly to indicate that a corporation suspended for failure to file the required information statement is legally disabled from acting to the same extent as a corporation suspended under the Revenue and Taxation Code for nonpayment of taxes. The firm argues that the court below erred in (1) finding a Corporations Code suspension the same as a Revenue and Taxation Code suspension, and (2) finding that the firm acted in bad faith in believing the two kinds of suspensions should be treated differently.

    A finding of abuse of discretion in imposing sanctions under Code of Civil Procedure section 128.5 thus depends in part upon whether the trial court correctly interpreted the relevant statutes, and in part upon its assessment of the firm’s good faith or bad faith in taking the positions it did.

    354*354 The second prong of the firm’s argument is that the court abused its discretion in imposing sanctions under Code of Civil Procedure section 2023, for discovery abuse. That is, the firm contends that its conduct in Representing its client during ongoing discovery is not, in itself, an abuse of the discovery process. Neither the client nor the firm, for example, refused to provide relevant requested discovery, interposed abusive discovery requests, or did anything to harm or delay the regular processes of discovery. The sole bad act claimed was the fact of participating in discovery while the corporation was suspended.

    We address each argument in turn.

    A. A Corporation Suspended Under Corporations Code Section 2205 for Failure to File a Required Information Statement Is Disabled From Participating in Litigation, As Is a Corporation Suspended Under Revenue and Taxation Code Section 23301 for Nonpayment of Taxes

    Corporations Code section 1502 provides that every corporation must file a statement every two years[1] containing such information as the corporation’s current directors, the number of board vacancies, if any, the current officers, and the name and address of a person in the state, designated to receive service of legal process upon the corporation. Corporations Code section 2204 provides that, if a corporation fails to file its required information statement under section 1502, the Secretary of State shall give notice of the delinquency; 60 days after notice of the delinquency, the Secretary of State must certify the name of the corporation to the Franchise Tax Board, and the Franchise Tax Board imposes a penalty upon the corporation.[2]

    If a corporation fails to file a statement under Corporations Code section 1502, fails to file a statement for 24 months, and has been assessed a penalty under Corporations Code section 2204 during that 24-month period, then the corporation is subject to suspension under Corporations Code section 2205. The Secretary of State must notify the corporation that “its corporate powers, rights, and privileges” will be suspended after an additional 60 days, if it fails to file a statement under section 1502. If the corporation fails to comply within 60 days, the Secretary of State certifies to the Franchise Tax Board that the corporation is suspended, and mails a notice to the suspended corporation. “[T]hereupon, except for the purpose of amending the articles of incorporation to set forth a new name, the corporate powers, rights, and privileges of the corporation are suspended.” (Corp.Code, § 2205, subd. (c).)

    Corporations Code section 2205, former subdivision (d), provides that, notwithstanding the suspension, the corporation is empowered to file a statement Under section 1502; if it does so, the Secretary of State “shall certify that fact to the Franchise Tax Board and the corporation may thereupon be relieved from suspension” unless it is also suspended by the Franchise Tax Board for nonpayment of taxes. Before Corporations Code section 2205 was amended in 1999, it provided that the Secretary of State must certify the suspended corporation’s compliance with section 1502 to the Franchise Tax Board, and that the corporation may “thereupon, in accordance with Section 23305a of the Revenue and Taxation Code, be relieved from suspension. . . .” (Italics added. See Stats.1999, ch. 1000, § 23, p. 5976.) The italicized language was in effect at the time of all the events herein.

    We think it plain upon a reading of the statutory provisions that a corporation 355*355 suspended for failure to file a required statement under Corporations Code section 1502 is, like a corporation suspended for failure to pay taxes under Revenue and Taxation Code section 23301, disabled from participating in any litigation activities.

    The firm concedes that a corporation suspended for nonpayment of taxes is disabled from resort to the courts for any purpose. “The purpose of Revenue and Taxation Code section 23301 is to `prohibit the delinquent corporation from enjoying the ordinary privileges of a going concern’ [citation], and to pressure it to pay its taxes [citation].” (Grell v. Lad Le Beau Corp. (1999) 73 Cal.App.4th 1300, 1306, 87 Cal.Rptr.2d 358.) The firm argues that such a statutory purpose, i.e., collection of taxes, does not apply when a corporation is suspended for failure to file a statement, and not for nonpayment of taxes. Thus, the firm argues, it could reasonably believe that a suspension under the Corporations Code did not disqualify it from access to or use of the courts.

    We disagree. Corporations Code section 2205, subdivision (b) expressly states that the failure to file the required statement will result in suspension of a corporation’s “corporate powers, rights, and privileges.” This parallels the language of Revenue and Taxation Code section 23301, which provides that “the corporate powers, rights and privileges of a domestic taxpayer may be suspended” for nonpayment of taxes. (Italics added.)

    Corporations Code section 2205, subdivision (c) makes clear that, “except for the purpose of amending the articles of incorporation to set forth a new name,” the suspended corporation may transact no business of any kind. Conducting litigation is not “amending the articles of incorporation to set forth a new name.”

    Corporations Code section 2205, subdivision (d), at all times relevant herein, provided that a suspended corporation could be restored Upon filing the required statement “in accordance with Section 23305a of the Revenue and Taxation Code.” Section 23305a of the Revenue and Taxation Code sets forth the prerequisites to issuance of a certificate of revivor by the Franchise Tax Board.

    All these statutory provisions should strongly indicate to any reasonable attorney that a corporation suspended for failure to file a statement under Corporations Code section 1502 is indeed disqualified from litigation and all other activities. All its “corporate powers, rights, and privileges” are suspended; the only exceptions provided by statute are to change the name of the corporation, and to cure the default by filing the missing statement.

    Cross-references to the Revenue and Taxation Code also clearly indicate that a corporation suspended under the Corporations Code is equally disabled from acting as a corporation suspended under the Revenue and Taxation Code. Indeed, the penalty provided under Corporations Code section 2204 is imposed under Revenue and Taxation Code section 19141; the $250 penalty imposed under that provision is expressly made “a final assessment due and payable at the time of assessment,” and it “shall be collected as other taxes, interest, and penalties are collected by the Franchise Tax Board. . . .”

    Just as the state may wish to persuade its corporate citizens to pay their taxes, it also may wish to persuade them to comply with basic filing requirements, requirements that are fundamental to holding a corporation accountable for its actions.

    The statutory language of the relevant sections, as well as legislative policy, are more than sufficient to put any reasonable attorney on notice—or at least to entertain a reasonable suspicion—that a corporation suspended under the Corporations Code, like a corporation suspended for nonpayment of taxes, is well and truly suspended, and disabled from participating in any litigation activities.

    356*356 The trial court did not err in so construing the statutes, and thus did not abuse its discretion in determining that the firm knew or should have known that Design MTC was disqualified from representing itself in the litigation.

    Our conclusion is further buttressed by Signal Data Proc. v. Rex Humbard Found.(Ohio App. 9 Dist.1994) 99 Ohio App.3d 646, 651 N.E.2d 498. There the Ohio Court of Appeals held that a California corporation suspended pursuant to Corporations Code section 2205, for failure to file a statement, lacked authority to register a California judgment in Ohio, or to authorize an attorney to act in Its behalf, and would remain so unless and until it cured the deficiency which had caused its suspension.

    B. The Trial Court Did Not Abuse Its Discretion in Determining that the Firm. Had Acted in Bad Faith in Pursuing Litigation Activities While Its Client Was Suspended

    The firm argues that, although we now have construed the Corporations Code suspension provisions in the same manner as the Revenue and Taxation Code suspension provisions, it could in good faith have believed that there was a legitimate difference in the effect of the two suspensions, and thus properly continued to represent its client despite its knowledge of the suspension.

    The record belies the firm’s assertions of good faith. The firm knew as of March 1998 of Design MTC’s suspended status. Giving the benefit of any doubt to the firm, that it in fact researched the matter at that time and discovered that Design MTC was suspended for failure to file a section 1502 statement, and not for nonpayment of taxes, we think it inescapable that any reasonable attorney reviewing the relevant statutes would entertain a strong suspicion that Design MTC was disqualified from exercising any powers, including the right to resort to the courts in litigation. Nevertheless, the firm chose to conceal its knowledge of the suspension, and probable disability of its client, from both the court and opposing counsel. Knowing concealment of material facts is not the hallmark of good faith.

    The firm urges that it could not discharge its ethical duties to represent its client, if it had to reveal the client’s suspended status to the court and counsel. Not so. If the corporation had been suspended for nonpayment of taxes, the client’s disability would have been clear, and the attorney’s duty to report that to the court would also have been clear. The attorney’s obligation to its client would be to advise the client to pay its back taxes. If the client corporation is in such financial straits that it has been unable to pay its taxes, to the degree that it has become suspended, such advice may ring hollow. Where a corporation has been suspended for noncompliance with filing requirements, however, curing the default is simple. All the client corporation must do is file the required statement under Corporations Code section 1502. The firm did not, however, make any such recommendation to its client, Design MTC. This failure supports the inference that the firm in fact made no investigation at the time it discovered its client’s suspended status, and that it therefore likely believed Design MTC was suspended for failure to pay taxes. If so, then the firm’s willful concealment of the suspension militates toward a finding of bad faith.

    Other evidence supports this conclusion. Remarks made by the firm’s attorneys at hearings on the sanctions motion indicate that the firm did not consciously decide that Design MTC’s suspension was not of a kind that should disable it from litigation. Rather, it appears that this theory was a post hoc rationalization, and did not occur to the firm’s attorneys until the eve of the sanctions hearing. At the hearing on August 28, 1998, Design MTC’s counsel stated that he had “had no time to look into” the question whether the corporate suspension resulted in the corporation’s 357*357 lack of standing to litigate. At the first sanctions hearing on September 4, 1998, the firm’s representative stated to the court: “When we appeared [on August 28], we were not prepared to address the issue of the suspension with the Court. . . . [¶] After we had the opportunity to look at the documents . . . it was learned that in fact MTC Design was not suspended for failure to pay taxes. [¶] Therefore, it’s our position that the tax and revenue codes that provide that a suspended corporation cannot represent itself in court do not apply.”

    The record fully supports the conclusion that the firm did not continue representing Design MTC based on its good-faith belief in the difference between a Corporations Code suspension and a Revenue and Taxation Code suspension; it supports the conclusion, rather, that the firm suspected its client was disabled from litigation, but deliberately concealed this fact from the court and the other parties, and continued to litigate vigorously, even seeking summary proceedings to terminate the case before the corporation’s suspended status was discovered. The firm’s actions on behalf of its client served only to delay and avoid an otherwise inevitable default judgment, in the absence of any acts by Design MTC to cure its suspended status.

    The trial court did not abuse its discretion in taking this view of the evidence and record before it; consequently, it did not abuse its discretion in imposing sanctions therefor.

    C. The Court Did Not Abuse Its Discretion in Imposing Discovery Sanctions

    The firm argues that imposition of sanctions in reliance on Code of Civil Procedure section 2023 was improper, because the firm did not engage in any abuse of the discovery process itself.

    The homeowners note, as the firm concedes, that the conduct listed in Code of Civil Procedure section 2023 as sanctionable discovery abuses is not exclusive. In our view, participating in discovery on behalf of a suspended corporation, knowing that the corporation is suspended, and having reason to know or suspect that such suspension disabled the corporation from participating in the litigation, qualifies as conduct abusive of the discovery process, and thus sanctionable. We cannot see any abuse of discretion in so holding, particularly if the sanctions order was also fully justified on other grounds.

    DISPOSITION

    For the reasons stated, we find no abuse of discretion in imposing the order for sanctions on the firm. The order for sanctions is affirmed.

    HOLLENHORST, Acting P.J., and GAUT J., concur.

    [1] In 1999, the Legislature amended Corporations Code section 1502 to require biennial instead of annual statements. (Stats. 1999, ch. 1000, § 20, p. 5974.)

    [2] The penalty imposed by the Franchise Tax Board is made as provided in section 19141 of the Revenue and Taxation Code, and is currently $250.

     

    ×
  • Pinnacle Museum v. Pinnacle

    Pinnacle Museum v. Pinnacle

    55 Cal.4th 223 (2012)

    231*231 Wood, Smith, Henning & Berman, Daniel A. Berman, Sheila E. Fix, R. Gregory Amundson, Nicholas M. Gedo; Hecht Solberg Robinson Goldberg & Bagley, Jerold H. Goldberg, Richard A. Schulman, Gregory S. Markow and Amanda A. Allen for Defendants and Appellants.

    Luce, Forward, Hamilton & Scripps, and Kathleen F. Carpenter for California Building Industry Association as Amicus Curiae on behalf of Defendants and Appellants.

    Feinberg Grant Mayfield Kaneda & Litt, Fenton Grant Mayfield Kaneda & Litt, Daniel H. Clifford, Joseph Kaneda, Charles Fenton and Bruce Mayfield for Plaintiff and Respondent.

    Berding & Weil, Matt J. Malone, Tyler P. Berding; Epsten Grinnell & Howell, Anne L. Rauch, Jon Epsten, Douglas Grinnell; Niddrie Fish & Addams and David A. Niddrie for Executive Council of Homeowners and Consumer Attorneys of California as Amici Curiae on behalf of Plaintiff and Respondent.

    OPINION

    BAXTER, J. —

    An owners association filed the instant construction defect action against a condominium developer, seeking recovery for damage to its property and damage to the separate interests of the condominium owners who compose its membership. In response, the developer filed a motion to compel arbitration, based on a clause in the recorded declaration of covenants, conditions, and restrictions providing that the association and the individual owners agree to resolve any construction dispute with the developer through binding arbitration in accordance with the Federal Arbitration Act (FAA; 9 U.S.C. § 1 et seq.).

    232*232 We granted review to determine whether the arbitration clause is binding on the association, and if so, whether it must be invalidated as unconscionable. As we shall explain, even though the association did not exist as an entity independent of the developer when the declaration was drafted and recorded, it is settled under the statutory and decisional law pertaining to common interest developments that the covenants and terms in the recorded declaration reflect written promises and agreements that are subject to enforcement against the association. We conclude that the arbitration clause binds the association and is not unconscionable.

    FACTUAL AND PROCEDURAL BACKGROUND

    Pinnacle Market Development (US), LLC, and others (collectively Pinnacle) developed a mixed-use residential and commercial common interest community in San Diego known as the Pinnacle Museum Tower Condominium (the Project). Pursuant to the Davis-Stirling Common Interest Development Act (Civ. Code, § 1350 et seq.; the Davis-Stirling Act or the Act), Pinnacle, as the owner and developer of the Project property, drafted and recorded a “Declaration of Restrictions” to govern its use and operation (the Project CC&R’s). The Project CC&R’s contains a number of easements, restrictions and covenants, which it describes as “enforceable equitable servitudes” and “binding on all parties having any right, title or interest” in the property, and their heirs, successors and assigns. The Project CC&R’s also provided for the creation of a nonprofit mutual benefit corporation called the Pinnacle Museum Tower Association (the Association) to serve as the owners association responsible for managing and maintaining the Project property.

    In selling the Project units, Pinnacle conveyed to each buyer an airspace condominium in fee and a proportionate undivided interest in the common area as a tenant in common. All other real property (including the property in the tower module, the parking structure, and other appurtenances) was deeded directly to the Association in fee.[1] Pursuant to the Project CC&R’s, each condominium owner is a member of the Association with certain voting rights, and each agrees to pay assessments for all purposes described in the declaration, including the Association’s maintenance and improvement of the Association’s property and the common areas.

    As relevant here, article XVIII of the Project CC&R’s (article XVIII) recites that, by accepting a deed for any portion of the Project property, the Association and each condominium owner agree to waive their right to a jury trial and to have any construction dispute resolved exclusively through 233*233 binding arbitration in accordance with the FAA and the California Arbitration Act (CAA; Code Civ. Proc., § 1280 et seq.).[2] Article XVIII specifies that it applies only to a construction dispute in which Pinnacle has been named as a party, and provides that no amendment may be made to its terms without Pinnacle’s written consent.

    The individual owners bought condominium units in the Project pursuant to a standard purchase agreement. The agreement anticipated creation of the Association and explicitly provided: “By acceptance of the Grant Deed to the Condominium, Buyer shall be deemed to have accepted and agreed to comply” with the recorded Project CC&R’s. Section 8 of the purchase agreement stated that, by agreeing to resolve all disputes as provided in article XVIII, the parties give up their respective rights to have such disputes tried before a jury. Section 8 also required the parties to initial a provision reciting their agreement “TO COMPLY WITH ARTICLE XVIII OF THE DECLARATION WITH RESPECT TO THE DISPUTE REFERENCED THEREIN.”[3]

    The Association filed the instant action against Pinnacle, alleging that construction defects caused damage to the Project. As the sole plaintiff, the Association seeks recovery not only for damage to its own property, but also for damage to the interests held by its individual members. The Association claims standing to represent the owners’ interests pursuant to Civil Code section 1368.3, which grants an owners association the requisite standing to sue a developer in its own name for damage to the common areas and damage to the separate interests the association is obligated to maintain or repair. (See Windham at Carmel Mountain Ranch Assn. v. Superior Court (2003) 109 Cal.App.4th 1162, 1172, 1174-1175 [135 Cal.Rptr.2d 834][addressing predecessor to Civ. Code, § 1368.3]; see also Civ. Code, § 945.)

    234*234 Pinnacle filed a motion to compel arbitration, contending the FAA mandates enforcement of article XVIII’s arbitration provisions. The trial court determined that the FAA is applicable and that article XVIII embodies an agreement to arbitrate between Pinnacle and the Association. Nonetheless, the court invalidated the agreement upon finding it marked by slight substantive unconscionability and a high degree of procedural unconscionability.

    The Court of Appeal affirmed. Although finding unanimously that the FAA is applicable, the court concluded, by a split vote, that the arbitration clause in the Project CC&R’s does not constitute an agreement sufficient to waive the Association’s constitutional right to jury trial for construction defect claims. The majority additionally held that, even assuming the Association is bound by the jury waivers in the purchase agreements signed by the individual condominium owners, the waivers are unconscionable and unenforceable.

    We granted Pinnacle’s petition for review.

    DISCUSSION

    Article XVIII of the Project CC&R’s provides that Pinnacle and, by accepting a deed to any portion of the Project property, the Association and each individual condominium owner agree to submit any construction dispute to binding arbitration in accordance with the FAA (and with the CAA to the extent it is consistent with the FAA). (See ante, fn. 2.) To determine whether article XVIII is binding upon and enforceable against the Association, we consider the rules governing compelled arbitration of claims, the principles relating to the contractual nature of the covenants and restrictions in a declaration recorded pursuant to the Davis-Stirling Act, and the doctrine of unconscionability.

    A. Arbitration Under the FAA

    Consistent with the express terms of article XVIII, both the trial court and the Court of Appeal determined that the FAA applies in this case because materials and products incorporated into the Project were manufactured in other states. (9 U.S.C. § 2; seeAllied-Bruce Terminix Cos. v. Dobson (1995) 513 U.S. 265, 281-282 [130 L.Ed.2d 753, 115 S.Ct. 834].) Although the Association currently disputes the FAA’s applicability, we accept the determination of the lower courts because the issue was not preserved for review.

    (1) Section 2 of the FAA provides in relevant part: “A written provision in … a contract evidencing a transaction involving commerce to settle by 235*235 arbitration a controversy thereafter arising out of such contract or transaction… shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” (9 U.S.C. § 2.) This statute stands as “a congressional declaration of a liberal federal policy favoring arbitration agreements, notwithstanding any state substantive or procedural policies to the contrary.” (Moses H. Cone Hospital v. Mercury Constr. Corp. (1983) 460 U.S. 1, 24 [74 L.Ed.2d 765, 103 S.Ct. 927] (Moses H. Cone).)[4]

    To ensure that arbitration agreements are enforced according to their terms, “the FAA pre-empts state laws which `require a judicial forum for the resolution of claims which the contracting parties agreed to resolve by arbitration.'” (Volt Info. Sciences v. Leland Stanford Jr. U. (1989) 489 U.S. 468, 478 [103 L.Ed.2d 488, 109 S.Ct. 1248] (Volt); see, e.g., Perry v. Thomas (1987) 482 U.S. 483 [96 L.Ed.2d 426, 107 S.Ct. 2520] [FAA preempts Cal. Lab. Code provision allowing maintenance of wage collection actions despite private agreement to arbitrate]; Southland Corp. v. Keating(1984) 465 U.S. 1 [79 L.Ed.2d 1, 104 S.Ct. 852] [FAA preempts Cal. statute rendering agreements to arbitrate franchise claims unenforceable].) Likewise, the FAA precludes a court from construing an arbitration agreement “in a manner different from that in which it otherwise construes nonarbitration agreements under state law. Nor may a court rely on the uniqueness of an agreement to arbitrate as a basis for a state-law holding that enforcement would be unconscionable, for this would enable the court to effect what … the state legislature cannot.” (Perry, at pp. 492-493, fn. 9.)

    One of the consequences of the FAA’s applicability is its effect on Code of Civil Procedure section 1298.7, which allows a purchaser to pursue a construction and design defect action against a developer in court, even when the parties have signed a real property purchase and sale agreement containing an arbitration clause.[5]Even assuming this California statute might otherwise extend to a recorded condominium declaration, the FAA would preempt its application here because it discriminates against arbitration. (See Shepard v. Edward Mackay Enterprises, Inc.(2007) 148 Cal.App.4th 1092, 236*236 1095 [56 Cal.Rptr.3d 326].) The Court of Appeal agreed on this point, and the Association does not rely on this statute to avoid arbitration.

    (2) Nonetheless, it is a cardinal principle that arbitration under the FAA “is a matter of consent, not coercion.” (Volt, supra, 489 U.S. at p. 479.) Thus, “`a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.'” (AT&T Technologies v. Communications Workers (1986) 475 U.S. 643, 648 [89 L.Ed.2d 648, 106 S.Ct. 1415]; see Cronus Investments, Inc. v. Concierge Services(2005) 35 Cal.4th 376, 384-385 [25 Cal.Rptr.3d 540, 107 P.3d 217].) In determining the rights of parties to enforce an arbitration agreement within the FAA’s scope, courts apply state contract law while giving due regard to the federal policy favoring arbitration. (Volt, at p. 474; see Moses H. Cone, supra, 460 U.S. at p. 24.)

    (3) In California, “[g]eneral principles of contract law determine whether the parties have entered a binding agreement to arbitrate.” (Craig v. Brown & Root, Inc. (2000) 84 Cal.App.4th 416, 420 [100 Cal.Rptr.2d 818]; see Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972-973 [64 Cal.Rptr.2d 843, 938 P.2d 903].) Generally, an arbitration agreement must be memorialized in writing. (Fagelbaum & Heller LLP v. Smylie (2009) 174 Cal.App.4th 1351, 1363 [95 Cal.Rptr.3d 252].) A party’s acceptance of an agreement to arbitrate may be express, as where a party signs the agreement. A signed agreement is not necessary, however, and a party’s acceptance may be implied in fact (e.g., Craig, at p. 420 [employee’s continued employment constitutes acceptance of an arbitration agreement proposed by the employer]) or be effectuated by delegated consent (e.g., Ruiz v. Podolsky (2010) 50 Cal.4th 838, 852-854 [114 Cal.Rptr.3d 263, 237 P.3d 584] (Ruiz).) An arbitration clause within a contract may be binding on a party even if the party never actually read the clause. (24 Hour Fitness, Inc. v. Superior Court (1998) 66 Cal.App.4th 1199, 1215 [78 Cal.Rptr.2d 533].)

    (4) The party seeking arbitration bears the burden of proving the existence of an arbitration agreement, and the party opposing arbitration bears the burden of proving any defense, such as unconscionability. (Engalla v. Permanente Medical Group, Inc., supra, 15 Cal.4th at p. 972.) Where, as here, the evidence is not in conflict, we review the trial court’s denial of arbitration de novo. (Service Employees Internat. Union, Local 1021 v. County of San Joaquin (2011) 202 Cal.App.4th 449, 455 [135 Cal.Rptr.3d 844].)

    B. Contractual Nature of Terms in a Recorded Declaration

    (5) The Davis-Stirling Act governs the creation and operation of common interest developments such as the condominium development here. Pursuant to the Act, a condominium development may be created when a developer of 237*237 land records a declaration and other documents to that effect and thereafter conveys one of the units in the development. (Civ. Code, § 1352.)

    As one of the primary documents governing the development’s operation, the declaration must set forth a legal description of the development, the name of the owners association that will own or operate the development’s common areas and facilities, and the covenants and use restrictions that are intended to be enforceable equitable servitudes. (Civ. Code, §§ 1351, 1353.) In addition, the declaration may “contain any other matters the original signator of the declaration [(e.g., the developer)] or the owners consider appropriate.” (Civ. Code, § 1353, subd. (b); see Cal. Code Regs., tit. 10, § 2792.8, subd. (a).)

    (6) Terms commonly included in a declaration concern membership and voting rights in the owners association, maintenance responsibilities, procedures for calculating and collecting assessments, accounting and insurance requirements, architectural and/or design control, and enforcement of the declaration. Pursuant to state regulatory law, a declaration may also include provisions for binding or nonbinding arbitration of disputes between a developer and an owners association, so long as the designated process for arbitration satisfies certain regulatory requirements. (Bus. & Prof. Code, §§ 11001, 11004.5, 11018.5; Cal. Code Regs., tit. 10, § 2791.8; seepost, fn. 7.) When terms have been included for the benefit of the declarant (developer), an association’s ability to delete them is limited. That is, although an association may freely amend a declaration to remove certain types of restrictions once the developer has completed its construction and marketing activities (Civ. Code, § 1355.5, subds. (a), (b)), no court may approve an amendment that will “eliminate any special rights, preferences, or privileges designated in the declaration as belonging to the declarant, without the consent of the declarant” (Civ. Code, § 1356, subd. (e)(2)).

    (7) Once the first buyer manifests acceptance of the covenants and restrictions in the declaration by purchasing a unit, the common interest development is created (Civ. Code, § 1352), and all such terms become “enforceable equitable servitudes, unless unreasonable” and “inure to the benefit of and bind all owners of separate interests in the development” (Civ. Code, § 1354, subd. (a); see Bus. & Prof. Code, § 11018.5, subd. (c)). For this reason, we have described recorded declarations as “the primary means of achieving the stability and predictability so essential to the success of a shared ownership housing development.” (Nahrstedt v. Lakeside Village Condominium Assn. (1994) 8 Cal.4th 361, 382 [33 Cal.Rptr.2d 63, 878 P.2d 1275] (Nahrstedt).) Having a single set of recorded covenants and restrictions that applies to an entire common interest development protects the intent, expectations, and wishes of those buying into the development and the 238*238 community as a whole by ensuring that promises concerning the character and operation of the development are kept. (See Citizens for Covenant Compliance v. Anderson (1995) 12 Cal.4th 345, 364 [47 Cal.Rptr.2d 898, 906 P.2d 1314] (Citizens for Covenant Compliance); Nahrstedt, at p. 383.)

    One important feature contributing to the stability and success of condominium developments is that actual notice is not required for enforcement of a recorded declaration’s terms against subsequent purchasers. (Nahrstedt, supra, 8 Cal.4th at p. 379.) Rather, the recording of a declaration with the county recorder “provides sufficient notice to permit the enforcement” of the covenants and restrictions contained therein (ibid.; see Citizens for Covenant Compliance, supra, 12 Cal.4th at pp. 364-365; Villa Milano Homeowners Assn. v. Il Davorge (2000) 84 Cal.App.4th 819, 825 [102 Cal.Rptr.2d 1] (Villa Milano)), and condominium purchasers are “deemed to agree” to them. (Citizens for Covenant Compliance, at p. 365; see Villa Milano, at p. 825.)

    In this regard, the Legislature has provided various protections to help ensure that condominium purchasers know what they are buying into. For example, developers and subsequent sellers must provide copies of the declaration and other governing documents to prospective purchasers. (Bus. & Prof. Code, § 11018.6; Civ. Code, § 1368, subd. (a).) Additionally, developers generally must provide prospective purchasers with a copy of the Department of Real Estate’s public report approving the particular condominium development and a copy of a statutory statement outlining general information regarding common interest developments. (Bus. & Prof. Code, § 11018.1, subds. (a), (c); see Bus. & Prof. Code, § 11018.2.) The statutory statement informs prospective purchasers that their ownership in the development and their rights and remedies as members of its association “`will be controlled by governing instruments'” such as the “`Declaration of Restrictions (also known as CC&R’s),'” and that they should “`[s]tudy these documents carefully before entering into a contract to purchase a subdivision interest.'” (Bus. & Prof. Code, § 11018.1, subd. (c).) Hence, condominium owners should not be surprised by the covenants and restrictions in a recorded declaration, which ordinarily are given binding effect even if they would not fulfill the common law requirements for creation of an equitable servitude or a restrictive covenant (Villa De Las Palmas Homeowners Assn. v. Terifaj (2004) 33 Cal.4th 73, 87 [14 Cal.Rptr.3d 67, 90 P.3d 1223]), or the privity requirements of a contract (Civ. Code, §§ 1350-1378; Nahrstedt, supra, 8 Cal.4th at p. 380).

    (8) Another significant way in which the Act promotes stability and predictability is by providing that the “covenants and restrictions in the declaration shall be enforceable equitable servitudes, unless unreasonable, and shall inure to the benefit of and bind all owners of the separate interests 239*239 in the development.” (Civ. Code, § 1354, subd. (a), italics added.) This statutory presumption of reasonableness requires that recorded covenants and restrictions be enforced “`unless they are wholly arbitrary, violate a fundamental public policy, or impose a burden on the use of affected land that far outweighs any benefit.'” (Villa De Las Palmas Homeowners Assn. v. Terifaj, supra, 33 Cal.4th at p. 88, quoting Nahrstedt, supra, 8 Cal.4th at p. 382.)

    (9) In Nahrstedt, supra, 8 Cal.4th 361, we elaborated upon the contractual nature of a declaration and the enforcement of its terms as equitable servitudes under the Davis-Stirling Act. “[E]quitable servitudes permit courts to enforce promises restricting land use when there is no privity of contract between the party seeking to enforce the contract and the party resisting enforcement. Like any promise given in exchange for consideration, an agreement to refrain from a particular use of land is subject to contract principles, under which courts try `to effectuate the legitimate desires of the covenanting parties.’ [Citation.] When landowners express the intention to limit land use, `that intention should be carried out.'” (Nahrstedt, at pp. 380-381.) AlthoughNahrstedt spoke specifically in terms of land use restrictions, its analysis logically extends to all covenants in a declaration, which by statute are also enforceable as equitable servitudes unless unreasonable. (Civ. Code, § 1354, subd. (a); e.g., Arias v. Katella Townhouse Homeowners Assn., Inc. (2005) 127 Cal.App.4th 847 [26 Cal.Rptr.3d 113] [condominium owner who prevailed in enforcement action entitled to recover contractual attorney fees under covenants, conditions, and restrictions].)

    Moreover, settled principles of condominium law establish that an owners association, like its constituent members, must act in conformity with the terms of a recorded declaration. (See Civ. Code, § 1354, subd. (a); Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249, 268 [87 Cal.Rptr.2d 237, 980 P.2d 940] [homeowner can sue association to compel enforcement of declaration’s provisions]; Ritter & Ritter, Inc. Pension & Profit Plan v. The Churchill Condominium Assn. (2008) 166 Cal.App.4th 103, 124 [82 Cal.Rptr.3d 389].) There is, of course, no question that an owners association functions as an entity distinct and separate from its owner members and may hold title to real property in a condominium development in its own name. However, an association must exercise its property rights and its right of management over the affairs of a development in a manner consistent with the covenants, conditions, and restrictions of the declaration (CC&R’s). That a declaration operates to bind an association is both logical and sound, for the success of a development would be gravely undermined if the association were allowed to disregard the intent, expectations, and wishes of those whose collective interests the association represents. (See Citizens for Covenant Compliance, supra, 12 Cal.4th at p. 364; Nahrstedt, supra, 8 Cal.4th at pp. 382-384.)

    240*240 In light of the foregoing, it is no surprise that courts have described recorded declarations as contracts. (E.g., Frances T. v. Village Green Owners Assn. (1986) 42 Cal.3d 490, 512-513 [229 Cal.Rptr. 456, 723 P.2d 573] [CC&R’s as contract between condominium owners association and unit owner]; Villa Milano, supra, 84 Cal.App.4th at pp. 824-826 [CC&R’s as contract between developer and homeowners association]; see Barrett v. Dawson (1998) 61 Cal.App.4th 1048, 1054 [71 Cal.Rptr.2d 899] [right of neighbors to enforce a recorded restrictive covenant limiting the neighboring property’s use was “clearly contractual”]; Harbor View Hills Community Assn. v. Torley (1992) 5 Cal.App.4th 343, 346-349 [7 Cal.Rptr.2d 96][amendment to Civ. Code, § 1717, which governs contractual attorney fees, was applicable to CC&R’s of homeowners association]; see also Franklin v. Marie Antoinette Condominium Owners Assn. (1993) 19 Cal.App.4th 824, 828, 833 [23 Cal.Rptr.2d 744] [accepting parties’ assumption that CC&R’s formed a contract between condominium owners and owners association].)

    In the proceedings below, the Court of Appeal held the arbitration clause in the Project CC&R’s was not binding on the Association. Specifically, the court observed that the Association could not have agreed to arbitrate or waive its constitutional right to a jury trial, because “for all intents and purposes, Pinnacle was the only party to the `agreement,’ and there was no independent homeowners association whenPinnacle recorded the CC&R’s.” This reasoning is not persuasive in light of the statutory and contract principles at play.

    (10) “It is true we have emphasized that arbitration derives its legitimacy from the fact that the parties consent to resort to the arbitral forum rather than to litigation, with its possibility of a jury trial. [Citation.] Such consent is generally required.” (Ruiz, supra,50 Cal.4th at p. 852.) As we have previously recognized, however, various legal theories allow for delegated authority to consent. Not only do common law principles such as fiduciary duty and agency permit enforcement of arbitration agreements against nonsignatory third parties, but the Legislature can also provide for the reasonable delegation of authority to consent. (Id. at pp. 852-854.)

    In Ruiz, supra, 50 Cal.4th 838, we addressed the operation of Code of Civil Procedure section 1295, which allowed, but did not require, a patient to contract with a health care provider to resolve all medical malpractice claims through binding arbitration. The question presented was whether an arbitration agreement signed by a patient applied to the resolution of wrongful death claims, which are not considered derivative of a patient’s claims, even though the wrongful death claimants were not themselves signatories to the arbitration agreement. (See Ruiz, at p. 841.) After observing that the statute intended to create “a capacity of health care patients to bind their heirs to arbitrate 241*241 wrongful death actions,” we found that binding the heirs “does not in any sense” extinguish or restrict their claims, “but merely requires that the claims `be resolved by a common, expeditious, and judicially favored method.'” (Id. at p. 852.) We firmly rejected the argument that a rule permitting a person to bind his or her adult children to arbitration would violate the state constitutional right to a jury trial. (Cal. Const., art. I, § 16.) As we explained, “the Legislature may devise reasonable rules in civil litigation to permit the delegation to another party of the power to consent to arbitration instead of a jury trial…. In the present case, the Legislature by statute has created the right of certain heirs to a wrongful death action and may also by statute place reasonable conditions on the exercise of that right.” (Ruiz, at p. 853.)

    (11) While not directly on point, the principles articulated in Ruiz support a similar result in the context of recorded declarations. As discussed, the Legislature has crafted a statutory scheme providing for the capacity of a developer to create a condominium development subject to covenants and restrictions governing its operation and use. There appears no question that, under the Davis-Stirling Act, each owner of a condominium unit either has expressly consented or is deemed by law to have agreed to the terms in a recorded declaration. As the exclusive members of an owners association, the owners have every right to expect that the association, in representing their collective interests, will abide by the agreed-upon covenants in the declaration, including any covenant to invoke binding arbitration as an expeditious and judicially favored method to resolve a construction dispute, in the absence of unreasonableness. That a developer and condominium owners may bind an association to an arbitration covenant via a recorded declaration is not unreasonable; indeed, such a result appears particularly important because (1) the Davis-Stirling Act confers standing upon an association to prosecute claims for construction damage in its own name without joining the individual condominium owners (Civ. Code, § 1368.3) and (2) as between an association and its members, it is the members who pay the assessments that cover the expenses of resolving construction disputes. Given these circumstances, an association should not be allowed to frustrate the expectations of the owners (and the developer) by shunning their choice of a speedy and relatively inexpensive means of dispute resolution. Likewise, condominium owners should not be permitted to thwart the expectations of a developer by using an owners association as a shell to avoid an arbitration covenant in a duly recorded declaration. (Villa Milano, supra, 84 Cal.App.4th at pp. 825-826, fn. 4.)

    Amici curiae in support of the Association point to a portion of Civil Code section 1353, subdivision (a), providing that a declaration shall set forth “the restrictions on the use or enjoyment of any portion of the common interest development that are intended to be enforceable equitable servitudes.” Focusing on this statutory language, amici curiae assert that the Davis-Stirling Act 242*242 limits a developer’s authority to impose on an owners association only provisions commonly understood as equitable servitudes, that is, restrictions relating to the use or maintenance of the property. (Civ. Code, §§ 1353, subd. (a), 1468, subd. (c).) In their view, an arbitration clause pertaining to construction disputes has no relationship to the use of property and therefore no place in a recorded declaration.

    (12) Even assuming that a covenant requiring arbitration of construction disputes does not fall within traditional notions of an equitable servitude, the Davis-Stirling Act, considered as a whole, does not support amici curiae’s narrow construction of its provisions. As discussed, the Act specifies that a declaration “may contain any other matters the original signator of the declaration [the developer] or the owners consider appropriate.” (Civ. Code, § 1353, subd. (b).) The Act also bars a court from approving an amendment to a declaration that would “eliminate any special rights, preferences, or privileges designated in the declaration as belonging to the declarant, without the consent of the declarant.” (Civ. Code, § 1356, subd. (e)(2).) Thus, notwithstanding the traditional uses to which equitable servitudes and recorded declarations have been put, the Act grants developers latitude to place in declarations any term they deem appropriate, including provisions that afford them special rights and privileges, so long as such terms are not unreasonable.

    It bears emphasis that placement of arbitration covenants in a recorded declaration violates none of the Davis-Stirling Act’s proscriptions.[6] To the contrary, their inclusion is consistent with the Department of Real Estate’s contemplation that a recorded declaration may feature a provision for binding arbitration between a developer and an owner’s association. (Cal. Code Regs., tit. 10, § 2791.8.)[7] In short, there is nothing in the Act itself that prohibits a recorded declaration from containing arbitration covenants.

    243*243 (13) Moreover, we find the inclusion of article XVIII in the Project CC&R’s is consistent with provisions of the Act that contemplate an alternative dispute resolution process as a prerequisite to construction defect litigation. Civil Code section 1375 provides that before an owners association may file suit against a developer for construction or design defects, the parties must either attempt to settle the dispute or attempt to agree to submit the matter to alternative dispute resolution presided over by a neutral facilitator. One court described these provisions as demonstrating that “the Legislature has chosen to encourage alternative dispute resolution between homeowners associations and developers, but not to require it.” (Villa Milano, supra, 84 Cal.App.4th at p. 831, italics added.) We agree with that specific observation, but see nothing in the language or history of Civil Code section 1375 that purports to prohibit a covenant for binding arbitration of construction defect claims.[8] Indeed, we perceive no legitimate reason to frustrate the expectations of purchasers who choose to buy into a development where binding arbitration is the designated process for resolving such claims. Like other methods of alternative dispute resolution, binding arbitration benefits both the developer and the entire common interest community by providing a speedy and relatively inexpensive means to address allegations of defect damage to the common areas and other property interests.

    (14) In addition to imposing prelitigation procedures for construction disputes, the Davis-Stirling Act requires that an owners association provide “a fair, reasonable, and expeditious procedure” for resolving disputes between an association and a member involving their rights, duties, or liabilities under the governing documents or the applicable statutes. (Civ. Code, § 1363.820, subd. (a); see Civ. Code, §§ 1363.810, 1363.830.[9]) The Act also requires that the association and its members use a separate alternative dispute resolution 244*244 procedure involving a neutral decision maker as a prerequisite to filing an “enforcement action” seeking declaratory, injunctive, or writ relief, either alone or in conjunction with a claim falling within the jurisdiction of the small claims court. (Civ. Code, § 1369.510 et seq.; see generally 12 Witkin, Summary of Cal. Law (10th ed. 2005) Real Property, § 125, p. 185.) We observe that article XVIII comports with these legislative efforts to encourage resolution of condominium matters out of court.

    In holding to the contrary, the Court of Appeal made reference to the foregoing dispute resolution schemes and focused on Civil Code section 1369.510, subdivision (a), which states in part: “The form of alternative dispute resolution chosen pursuant to this article [(governing enforcement actions filed by an owner or an association)] may be binding or nonbinding, with the voluntary consent of the parties.” (Italics added.) According to the Court of Appeal, the italicized clause signifies that “the waiver of the right to a jury requires an actual `agreement'” and that therefore arbitration provisions in a recorded declaration are not binding as an agreement to arbitrate. We disagree.

    (15) The language in Civil Code section 1369.510, subdivision (a), simply adheres to the familiar principle that arbitration is a matter of consent, not coercion. The provision does nothing to undermine the conclusion that terms calling for binding arbitration between a developer, condominium owners, and an owners association are properly included in a recorded declaration. (See Cal. Code Regs., tit. 10, § 2791.8.) As explained above, giving force to such terms in a development’s originating declaration protects the expectations of the individual owners and the community as a whole (Citizens for Covenant Compliance, supra, 12 Cal.4th at p. 364), as well as those of the developer (Civ. Code, § 1356, subd. (e)(2)).

    Finally, we see nothing in Treo @ Kettner Homeowners Assn. v. Superior Court(2008) 166 Cal.App.4th 1055 [83 Cal.Rptr.3d 318] (Treo) that compels a different result. In Treo, the CC&R’s of a condominium development contained a requirement that all disputes between a developer and a homeowners association be decided by a general judicial reference. The question was whether that requirement was enforceable under Code of Civil Procedure 245*245 section 638, which allows appointment of a referee (and hence waiver of a jury trial) if a reference agreement exists between the parties. Relying on Grafton Partners v. Superior Court (2005) 36 Cal.4th 944 [32 Cal.Rptr.3d 5, 116 P.3d 479] (Grafton), Treo determined that a waiver of the constitutional right to trial by jury requires “actual notice and meaningful reflection.” (Treo, supra, 166 Cal.App.4th at p. 1066.) Because the jury waiver in the subject CC&R’s did not meet those requirements, Treo held it was “not a written contract as the Legislature contemplated the term in the context of [Code of Civil Procedure] section 638.” (Treo, at p. 1067.) The Treo court was particularly troubled that the CC&R’s were lengthy and adhesive in nature, and that the jury waiver was not signed by the parties and could not be modified by the association. (Ibid.) Persuaded by Grafton‘s observation that any statutory ambiguity in permitting a jury waiver must be resolved in favor of affording a jury trial (Grafton, at p. 956), Treoconcluded that, even though CC&R’s “can reasonably be `construed as a contract’ … when the issue involved is the operation or governance of the association or the relationships between owners and between owners and the association,” CC&R’s do not “suffice as a contract when the issue is the waiver pursuant to [Code of Civil Procedure] section 638 of the constitutional right to trial by jury.” (Treo, at p. 1066.)

    (16) The Association’s reliance on that decision misplaced for at least two reasons. First, neither Treo nor Grafton concerned an agreement to arbitrate. Notably, Graftonexplicitly distinguished predispute jury waivers from predispute arbitration agreements, observing that arbitration agreements are specifically authorized by Code of Civil Procedure section 1281, and, unlike jury waivers, “represent an agreement to avoid the judicial forum altogether.” (Grafton, supra, 36 Cal.4th at p. 955.) Because public policy strongly favors arbitration as “`”`a speedy and relatively inexpensive means of dispute resolution'”‘” (Schatz v. Allen Matkins Leck Gamble & Mallory LLP, supra, 45 Cal.4th at p. 564), we decline to read additional unwritten procedural requirements, such as actual notice and meaningful reflection, into the arbitration statute.[10]

    (17) Second, whether or not a reference agreement must be evaluated differently from other types of agreements, state laws that discriminate against arbitration are preempted where, as here, the FAA applies. That is, the FAA precludes judicial invalidation of an arbitration clause based on state law requirements that are not generally applicable to other contractual clauses, such as proof of actual notice, meaningful reflection, signature by all parties, and/or a unilateral modification clause favoring the nondrafting party. 246*246 (Doctor’s Associates, Inc. v. Casarotto (1996) 517 U.S. 681, 687-688 [134 L.Ed.2d 902, 116 S.Ct. 1652] (Doctor’s Associates)[FAA preempts state’s first-page notice requirement for arbitration agreements].) It stands to reason that the FAA would preempt state decisional law singling out an arbitration clause as the only term in a recorded declaration that may not be regarded as contractual in nature. For this reason, we shall not selectively target article XVIII as containing the only clause of the recorded declaration that does not memorialize an agreement binding the Association.[11]

    (18) In sum, even though the Association did not bargain with Pinnacle over the terms of the Project CC&R’s or participate in their drafting, it is settled under the statutory and decisional law pertaining to common interest developments that the covenants and terms in the recorded declaration, including those in article XVIII, reflect written promises and agreements that are subject to enforcement against the Association. (Civ. Code, § 1350 et seq.; Nahrstedt, supra, 8 Cal.4th at pp. 378-384.)

    C. The Doctrine of Unconscionability

    Having determined that article XVIII of the Project CC&R’s is binding on the Association, we next determine whether the article’s provisions for arbitration are unenforceable as unconscionable.

    (19) “[G]enerally applicable contract defenses, such as … unconscionability, may be applied to invalidate arbitration agreements without contravening” the FAA. (Doctor’s Associates, supra, 517 U.S. at p. 687; accord, Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114 [99 Cal.Rptr.2d 745, 6 P.3d 669] (Armendariz).) (20) Unconscionability consists of both procedural and substantive elements. The procedural element addresses the circumstances of contract negotiation and formation, focusing on oppression or surprise due to unequal bargaining power. (See Armendariz, at p. 114; Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1071 [130 Cal.Rptr.2d 892, 63 P.3d 979] [procedural unconscionability “generally takes the form of a contract of adhesion”].) Substantive unconscionability pertains to the fairness of an agreement’s actual terms and to assessments of whether they are overly harsh or one-sided. (Armendariz, at p. 114; Mission Viejo Emergency Medical Associates v. Beta Healthcare Group (2011) 197 Cal.App.4th 1146, 1159 [128 Cal.Rptr.3d 330].) A contract term is not substantively unconscionable when it merely gives one side a greater benefit; rather, the term must be “so one-sided as to `shock the conscience.'” (24 Hour Fitness, Inc. v. Superior Court, supra, 66 Cal.App.4th at p. 1213.)

    247*247 (21) The party resisting arbitration bears the burden of proving unconscionability. (Engalla v. Permanente Medical Group, Inc., supra, 15 Cal.4th at p. 972; Mission Viejo Emergency Medical Associates v. Beta Healthcare Group, supra, 197 Cal.App.4th at p. 1158.) Both procedural unconscionability and substantive unconscionability must be shown, but “they need not be present in the same degree” and are evaluated on “`a sliding scale.'” (Armendariz, supra, 24 Cal.4th at p. 114.) “[T]he more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.” (Ibid.)

    (22) As indicated, procedural unconscionability requires oppression or surprise. “`Oppression occurs where a contract involves lack of negotiation and meaningful choice, surprise where the allegedly unconscionable provision is hidden within a prolix printed form.'” (Morris v. Redwood Empire Bancorp (2005) 128 Cal.App.4th 1305, 1317 [27 Cal.Rptr.3d 797].) Here, the trial court found no evidence of surprise.[12] Nonetheless, the court perceived a high degree of procedural unconscionability, because the Project CC&R’s were drafted and recorded by Pinnacle before any unit was purchased and before the Association was formed. Noting the Association had no opportunity to participate in the drafting of the recorded declaration, the court determined it was oppressive. (See Villa Milano, supra, 84 Cal.App.4th at p. 828[finding procedural unconscionability “obvious” where condominium purchasers had no opportunity to negotiate declaration’s terms].) This analysis is off the mark.

    That the Project CC&R’s were drafted and recorded before the sale of any unit and without input from the Association was a circumstance dictated by the legislative policy choices embodied in the Davis-Stirling Act. (Civ. Code, § 1352; see Bus. & Prof. Code, §§ 11018.1, 11018.2, 11018.5, subd. (c).) The intent of the Act is to permit landowners such as Pinnacle to develop and market their properties to purchasers as condominium developments operating under certain CC&R’s. By providing for Pinnacle’s capacity to record a declaration that, when accepted by the first purchaser binds all others who accept deeds to its condominium properties, the Act ensures that the terms 248*248 reflected in the declaration — i.e., the CC&R’s governing the development’s character and operation — will be respected in accordance with the expectations of all property owners and enforced unless proven unreasonable. (Nahrstedt, supra, 8 Cal.4th at pp. 378-384; see Citizens for Covenant Compliance, supra, 12 Cal.4th at p. 365.) Thus, while a condominium declaration may perhaps be viewed as adhesive, a developer’s procedural compliance with the Davis-Stirling Act provides a sufficient basis for rejecting an association’s claim of procedural unconscionability.[13]

    Moreover, the arbitration provisions of article XVIII are not substantively unconscionable. Preliminarily, we observe the Association has not shown that article XVIII fails to conform to the minimum regulatory standards for protection of the public interest. (Cal. Code Regs., tit. 10, § 2791.8; see ante, fn. 7.) Here, in fact, the Department of Real Estate reviewed and approved the Project CC&R’s before issuing the required public report for the Project. (Bus. & Prof. Code, §§ 11004.5, subd. (c), 11018.2, 11018.5.) On this point, the Association correctly asserts that neither the public report’s issuance nor the regulation itself binds us in determining enforceability of the arbitration provisions. Nonetheless, as discussed below, the Association neglects to identify any aspect of article XVIII that is overly harsh or so one-sided that it shocks the conscience. (24 Hour Fitness, Inc. v. Superior Court, supra, 66 Cal.App.4th at p. 1213.)

    In arguing that article XVIII is substantively unconscionable, the Association invokes the following passage in Armendariz, supra, 24 Cal.4th 83: “[A]n arbitration agreement imposed in an adhesive context lacks basic fairness and mutuality if it requires one contracting party, but not the other, to arbitrate all claims arising out of the same transaction or occurrence or series of transactions or occurrences.” (Id. at p. 120.) The Association then posits that article XVIII lacks basic fairness and mutuality because it allows Pinnacle to require arbitration of all construction disputes related to the Project, without requiring Pinnacle to arbitrate any claims it may have against the Association or the owners. This contention fails to persuade.

    (23) In the same part of Armendariz, we made clear that arbitration clauses may be limited to a specific subject or subjects and that such clauses are not required to “mandate the arbitration of all claims between [the parties] in order to avoid invalidation on grounds of unconscionability.” (Armendariz, supra, 24 Cal.4th at p. 120.) Here, the challenged clause is limited to construction disputes. To the extentPinnacle wishes to allege the 249*249 Association’s comparative fault as an affirmative defense with respect to damages (Civ. Code, § 1368.4, subd. (a)),[14] such issue would fall within the scope of article XVIII. Apart from that, the Association fails to identify any potential construction-related claim Pinnacle might assert against it that would not be subject to arbitration. Accordingly, there appears no support for the Association’s claims of unfairness and absence of mutuality.

    The Association next complains of a clause in article XVIII that provides: “Each of the parties shall bear its own attorney’s fees and costs (including expert witness costs) in the arbitration.” Notwithstanding the facial neutrality of this costs provision, the Association asserts it is evidence of substantive unconscionability because it effectively limits the Association’s right to full recovery of damages. (SeeArmendariz, supra, 24 Cal.4th at p. 121.)

    (24) The costs provision does no such thing. In court proceedings, a prevailing party generally may not recover expert witness fees as an item of costs unless the expert witness was appointed by the court. (Code Civ. Proc., § 1033.5, subd. (b)(1);Carwash of America-PO v. Windswept Ventures No. I (2002) 97 Cal.App.4th 540, 543-544 [118 Cal.Rptr.2d 536]; Stearman v. Centex Homes (2000) 78 Cal.App.4th 611, 623-624 [92 Cal.Rptr.2d 761]; cf. Code Civ. Proc., § 1033.5, subd. (a)(8) [“[f]ees of expert witnesses ordered by the court” are allowable as costs].) By its terms, the costs provision will neutrally benefit whichever party does not prevail in arbitration by barring the prevailing party from recovering such fees as an item of costs. At the same time, article XVIII elsewhere specifies that “[t]he arbitrator is authorized to provide all recognized remedies available at law or in equity for any cause of action.”Pinnacle confirms that the costs provision does not alter the Association’s “potential remedies as a litigant,” and that the Project CC&R’s “were drafted so that the parties’ remedies would not change.” Accordingly, the costs provision does not limit the availability of expert investigation expenses that are otherwise recoverable asdamages. (E.g., Stearman, at pp. 624-625 [even when expert witness fees are not recoverable as costs, expert investigation fees may be recovered as an item of damages under Civ. Code, § 3333].) In light of the foregoing, the costs provision provides little, if any, evidence of substantive unconscionability. (See Madden v. Kaiser Foundation Hospitals (1976) 17 Cal.3d 699, 711 [131 Cal.Rptr. 882, 552 P.2d 1178] [upholding an arbitration provision that did not purport to limit a party’s substantive obligations or liabilities, but “merely substitute[d] one forum for another”]; see also Ruiz, supra, 50 Cal.4th at p. 852.)

    250*250 The Association further points out that the Project CC&R’s imposes a requirement that the Association obtain Pinnacle’s written consent before amending the arbitration provisions. Emphasizing that Pinnacle drafted the document before the Association existed as an independent entity, the Association claims the consent provision demonstrates that Pinnacle was “looking after its own self-interests” and playing “unfairly to its unilateral benefit.” The Association also argues the consent provision “virtually eliminates the Association’s right to amend the [Project CC&R’s] pursuant to Civil Code sections 1355 and 1356.”

    These arguments lack merit. First, Civil Code section 1355 specifically contemplates that a recorded declaration may restrict or even eliminate the authority of an owners association and owners to amend its terms. (Civ. Code, § 1355, subd. (b) [permitting amendment “[e]xcept to the extent that a declaration provides by its express terms that it is not amendable”].) Second, and more to the point, Civil Code section 1356 flatly prohibits a court from approving any amendment to a declaration that “[w]ould eliminate any special rights, preferences, or privileges designated in the declaration as belonging to the declarant, without the consent of the declarant.” (Civ. Code, § 1356, subd. (e)(2).) Far from evidencing substantive unconscionability, the consent provision reflects a restrictive term that the Legislature, for policy reasons, has determined is reasonably and properly included in a recorded declaration.

    We conclude that article XVIII of the Project CC&R’s is consistent with the provisions of the Davis-Stirling Act and is not procedurally or substantively unconscionable. Its terms requiring binding arbitration of construction disputes are therefore enforceable.[15]

    CONCLUSION AND DISPOSITION

    Even when strict privity of contract is lacking, the Davis-Stirling Act ensures that the covenants, conditions, and restrictions of a recorded declaration — which manifest the intent and expectations of the developer and those who take title to property in a community interest development — will be 251*251 honored and enforced unless proven unreasonable. Here, the expectation of all concerned is that construction disputes involving the developer must be resolved by the expeditious and judicially favored method of binding arbitration.

    We hold that article XVIII’s covenant to arbitrate is not unconscionable and is properly enforced against the Association. Accordingly, we reverse the judgment of the Court of Appeal and remand the matter for further proceedings consistent with the views herein.

    Cantil-Sakauye, C. J., Chin, J., Corrigan, J., and Liu, J., concurred.

    WERDEGAR, J., Concurring. —

    Can the developer of a condominium project unilaterally impose arbitration on the condominium’s homeowners association by recording a mandatory arbitration clause for construction-related claims at or before the association’s inception? Because the Legislature has elected to permit developers to do so, I agree with the majority that a developer can and that the arbitration clause at issue here is enforceable. Because I think the clause’s validity rests on narrower grounds than those invoked by the majority, I write separately.

    I.

    Pinnacle Market Development (US), LLC (Pinnacle Development), built a condominium project. As required under the Davis-Stirling Common Interest Development Act (Civ. Code, § 1350 et seq.; Davis-Stirling Act),[1] it recorded a declaration containing