Order: BEACON RESIDENTIAL COMMUNITY ASSOCIATION VS. CATELLUS THIRD AND KING LLC et al

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                                UMAGA

SUPERIOR COURT OF CALIFORNIA
COUNTY OF SAN FRANCISCO

Document Scanning Lead Sheet
Oct-01-2014 1:52 pm

Case Number: CGC-08-478453
Filing Date: Oct-01-2014 1:52
Filed by: SHAWNA VANTREE
Juke Box: 001 Image: 04641749
ORDER

BEACON RESIDENTIAL COMMUNITY ASSOCIATION VS. CATELLUS THIRD
AND KING LLC et al

001004641749

Instructions:
Please place this sheet on top of the document to be scanned.FL. County Superior Court

OCT 9 4 2014

CLERI OF F THE COURT

BY: faipee
Deputy Clerk

SUPERIOR COURT OF CALIFORNIA

COUNTY OF SAN FRANCISCO

BEACON RESIDENTIAL COMMUNITY Case No. CGC - 08-478453
ASSOCIATION,

Plaintiff, ORDER GRANTING SKIDMORE, OWNINGS
& MERRILL LLP’S MOTION TO STRIKE

vs.

CATELLUS THIRD AND KING LLC, ET AL...

Defendants.

Introduction

Defendants HKS Architects, Inc. and Skidmore, Ownings & Merrill LLP were
architects for the Beacon housing complex at issue in this case. In 2011, Skidmore
demurred to the Third Amended Complaint (TAC), joined by HKS. Skidmore also filed a
motion to strike references to damages concerning plaintiff's solar heat gain allegations.
The motion to strike was based on Krusi, which holds that “when an owner of a building
suffers harm [to property] because of inadequate design of... .a building, a cause of action
accrues to that owner” when he discovers or reasonably ought to have discovered the
defect, and the cause of action cannot under most circumstances later accrue to a different
owner. Krusi v. SJ. Amoroso Construction Co., 81 Cal.App.4th 995, 1005-06 (2000). HKS

and Skidmore argued that because plaintiff alleged that defendants Prologis/Catellus andMission Place (the prior owners) were aware of the defects, any cause of action against the
architect defendants accrued to Catellus and Mission Place, and not to plaintiff.

Judge Kramer sustained the demurrer and so never ruled on the motion to strike.
His decision on the demurrer was ultimately reversed by the Supreme Court. Beacon
Residential Community Association v. Skidmore, Ownings & Merrill, 59 Cal.4% 568 (2014).

Now Skidmore has filed a Renewed Motion to Strike, attaching a copy of its brief
filed in 2011. Skidmore did not file an updated brief. HKS joined in Skidmore’s re-noticed
motion to strike, but this time it also filed its own, updated brief and a Request for Judicial
Notice.

I heard argument September 30, 2014.

Discussion

Timeliness

Plaintiff objects that both motions are untimely. The problem, clarified at argument,
is not that Skidmore refiled its motion, it is that it filed an ‘improved’ motion in that it has
now specified exactly which parts of the TAC it desires to have stricken; and it is long past
the time to have new motions to strike. C.C.P. § 435. I find the distinction is not important
in the present context, because the issue on the merits should be resolved, and the sooner it
is resolved the better, including for case management purposes. In any event the parties
agree I can entertain the motion to strike under C.C.P. § 436. Plaintiff is not prejudiced:

despite Judge Kramer order noted in note 1, it filed new oppositions in response to

1 In the event that plaintiff amended its complaint and Skidmore demurred, Judge Kramer stated that
Skidmore’s Motion to Strike would be “deemed refilled” upon Skidmore’s filing of a demurrer. Order (filed
November 22, 2011) 7:19. The Order stated that no further briefs should be filed by either party as to the
motion to strike. Jd. 7:20-21.oom YD nH F BW N

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Skidmore’s new notice? I do not accept HKS’ new separate motion, not that it practically
matters. HKS has no different argument, and the additional material it presents (see
Request for Judicial Notice) is not useful.? In its capacity as a joining party, HKS presented
at the hearing.

Merits

Skidmore moves to strike allegations of solar heat gain (as they relate to the
architects) as immaterial under C.C.P. § 431.10. Skidmore notes TAC J 116, which states
that Catellus and Mission Place had “actual knowledge of serious latent and patent
deficiencies” at the property, consisting of “improper construction of the windows,
ventilation and other related systems” that resulted in the units becoming “hot and stuffy”
and “essentially uninhabitable causing a health hazard.” TAC 53:6-10. The TAC states that
Catellus and Mission Place knew that Webcor and the architects elected to install
“substandard window glass” throughout the property. /d.53:14-16. Furthermore, Mission
Place attempted to remedy the problem by having a film installed on the windows, but the
film made the heat problem worse and caused cracking of the windows. Id. 53:18-23.

The moving parties argue the TAC’s allegations show that the prior owners of the
property, Catellus and Mission Place, knew about the defective windows prior to plaintiff's

purchase of the units, suffered damages as a result, and thus any claim against architects

2 As defendants noted, plaintiff did more: it filed both “objections” and oppositions, in effect granting itself far
more than the allocated page length.

3 The Request includes oppositions to summary judgment motions filed since Judge Kramer ruled on the
demurrers. These are irrelevant to the motion to strike. HKS’ papers do not explain the utility of these items,
and they do not appear to be admissible either as e.g., judicial admissions or under doctrines of judicial
estoppel. E.g., Myers v. Trendwest Resorts, Inc., 178 Cal. App. 4th 735, 746 (2009); Jackson v. Cnty. of Los
Angeles, 60 Cal. App. 4th 171, 183 (1997). Indeed, HKS did not suggest they were so admissible. The Request
is denied.0 we ND

with regard to the consequent heat gain belongs to Catellus and Mission Place, and not to
plaintiff. I agree.

We turn to Krusi v. Amoroso Construction Company, Inc., 81 Cal.App.4th 995 (2000):

When an owner ofa building suffers harm because of inadequate design ...

performed on the building, a cause of action accrues to that owner... it [the original

owner] may choose to deliberately transfer that cause of action to another, but
without some clear manifestation of such an intent, the cause of action is not
transferred to the subsequent owner.

Id. 1005-06.

Siegel v. Anderson Homes, Inc. 118 Cal.App.4th 994 (2004) clarified that the cause of
action accrues when the owner discovers or reasonably ought to have discovered the
defect. Id. at 1009. If the first owner does not so qualify, the next owner might then in
effect own the cause of action.

The TAC tells us that the defect was known to Mission Place and Catellus because
they knew about the substandard windows and improper ventilation, and they knew that
certain units became so hot that they were uninhabitable. Asa result of the heat problems,
the value of the units were impaired (because uninhabitable), and Mission Place took steps
to remedy the problem. This indicates that damages caused by the solar heat gain accrued
prior to plaintiff's ownership. Thus, the cause of action and damages related to the solar
heat gain belong to Mission Place and Catellus, and not to plaintiff.

Plaintiff objects to this use of the TAC’s allegations, arguing that it is error to use
facts alleged in one cause of action to defeat a different cause of action, at least when the
attacked claim does not purport to incorporate the allegations of the other claims. Plaintiff

relies on Lambert v. S. Counties Gas Co. of Cal, 52 Cal. 2d 347 (1959). There, one count

alleged a gas company was negligent; and a separate count alleged ranch owners werenegligent. The Court noted that liberal rules of joinder must allow suing all possibly liable
defendants, 52 Cal. 2d at 353, and held the one set of allegations could not be used to defeat
the other set, even if the theories of negligence could not both be true at the same time.
This followed from the rule that “a plaintiff may plead inconsistent causes of action in
separate counts of a single complaint.” 52 Cal. 2d at 352. That is just the rule for which
other cases have cited Lambert. E.g., Zeppi v. Beach, 229 Cal.App.2d 152, 160 (1964);
Vallejo v. Montebello Sewer Co., 209 Cal.App.2d 721, 728 (1962) (competing theories as to
which defendant is liable permissible in complaint). See generally, 5 B. Witkin, CALIFORNIA
PROCEDURE, Pleading § 956 (5% ed. 2008). So it is that the same evidence might support
either, both, or none of a plaintiff's conflicting legal theories, such as negligence and
intentional tort. Grudt v. City of Los Angeles, 2 Cal. 3d 575, 586 (1970).

Purely factual allegations are a different matter. When found ina complaint, those
allegations are judicial admissions, and they bind the party. Myers v. Trendwest Resorts,
Inc, 178 Cal. App. 4th 735, 746 (2009); Gibbs v. Am. Airlines, Inc, 74 Cal.App.4th 1, 11
(1999). This is so even when a party files a new complaint: the old allegations are still
binding when cast out in subsequent pleadings. E.g., Knoell v. Petrovich, 76 Cal.App.4th 164,
169 (1999). And this applies even when facts pleaded in one action are used in “separate
actions,” Cantu v. Resolution Trust Corp., 4 Cal.App.4th 857, 877-78 (1992), and it is
certainly true when it comes to separate causes of action: in all these cases, the same
principle is at stake—one that goes back further than Lambert—“that of truthful pleading. ”
Cantu, 4 Cal.App.4th at 877, quoting Watson v. Los Altos School Dist., 149 Cal.App.2d 768,

771 (1957) (emphasis in Watson).In response to this application of Krusi, plaintiff seeks to distinguish the opinion. In
Krusi, for example, the prior owner arbitrated a claim against the architect. Krusi, 81
Cal.App.4t at 997. But nothing in Krusi suggests this mattered.

Plaintiff also argues its damages are fundamentally different than those suffered by
Mission Place, relying on language such as this:

But, as applied to a case such as this, the Biakanja rule simply means that a duty may

run from an architect, engineer, or contractor to a subsequent owner of real

property. It does not mean that, in a case implicating damage to such property, once

a cause of action in favor of a prior owner accrues, another cause of action against

the same defendant or defendants can accrue to a subsequent property owner-

unless, of course, the damage suffered by that subsequent owner is fundamentally
different from the earlier type.

Krusi, 81 Cal. App. 4th at 1006 (emphasis in original). But what is this notion of
fundamental difference? Krusi means this in the lay sense of term, distinguishing injury to
the property caused by an earthquake from that caused by a leaky roof. 81 Cal.App.4" at
1006. Of course, in both cases there is property damage. But the cause is different; for
example, the causes arrive at different times. So these are different causes of action, Krusi
says, and different plaintiffs may have ‘different’ damages in that sense. This is not the
sense for which plaintiff argues, which, as adumbrated at argument, is the difference
between personal injury, loss of enjoyment, on the one hand, and economic loss on the
other hand, all arising out of the same event.

Plaintiff also argues that Mission Place did not suffer “actual economic injuries” from
the overheating, and cites both Siegel v. Anderson Homes, Inc, 118 Cal.App.4% 994 (2007)
and Standard Fire Ins. Co. v. Spectrum Community Assn., 141 Cal.App.4* 117 (2006) for the
proposition that without proof that the original owners suffered “economic injuries,” no

cause of action accrues.0 Oo ND

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In both those cases—Standard Fire relying on Siegel—the decision turned on the
fact that the plaintiffs were actually the first entities to hold a cause of action; it had not
existed on behalf of any prior owner; there were no earlier damages. Standard Fire Ins. Co.
v. Spectrum Cmty. Ass'n, 141 Cal. App. 4th 1117, 1145-46 (2006).* By contrast, here the
prior owner, Mission Place, did suffer economic injuries from the defect: according to the
TAC, the initial residents of the property complained to Mission Place and Mission Place
hired a window contractor to remedy the problem. TAC 53:10-12 and 18-23. Here, there
was a cause of action extant when the former owner had the property, and thus Krusi
controls.

Next, plaintiffs cite Jasmine Networks, Inc. v. Superior Court, 180 Cal. App. 4th 980,
992 (2009). There the Sixth District was faced with a trade secret misappropriate claim
made by a company which did not own the trade secret at the time of trial—but which had
owned it, and had at that earlier time been injured by the misappropriation. The issue was
thus “does the owner of an alleged trade secret lose the right to bring an action for its
misappropriation if, after the alleged misappropriation occurs, he sells his remaining
interest in the secret to a third party?” Jasmine, 180 Cal. App. 4th at 993, The answer was
no: “One whose property has been wrongfully damaged by another does not lose the right
to recover for that damage merely because he has sold the property at the time of suit.” Jd.
Jasmine saw various cases, including Krusi, as not implicating nor contradicting

the central premise that a right of action for damage to property is distinct from the

title to the property, and from any right in the property, and that the transfer of the
latter does not by itself effect a transfer or diminution of the former.

4 See also, Siegel v. Anderson Homes, Inc. 118 Cal.App.4th 994, 1009 (2004) (“the cause of action belongs to
the owner who first discovered, or ought to have discovered, the property damage. It is only then that some
entity capable of maintaining a legal claim will have suffered a compensable injury, e.g., the cost of repair
and/or the loss in the property's value (inasmuch as the owner then has a duty to disclose the damage to
potential buyers)”).oN DA ww

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Jasmine, 180 Cal.App.4th at 995. A paragraph later, Jasmine does express caution regarding
what might be an unspoken premise in Krusi. But still, Jasmine is not on point here,
because it addresses the right of the original owner to bring suit having indisputably had
the cause of action in the past, not the right of the latter owner (here, plaintiff) to sue when
it did not originally have the cause of action.

Plaintiff argues that Krusi should not apply because Catellus formed the Mission
Place entity in order to purchase and sell the condos. Plaintiff relies on Valenzuela v.
Superior Court, 3 Cal.App.4 1499 (1993). There, the court refused to impute knowledge of
a prior owner to the current owner of defective property for purposes of starting the
running of the statute of limitations for the plaintiffs’ claims against the developer. It
refused because the prior owner was actually an agent of the developer, formed for the sole
purpose of disposing of the property. /d. at 1500-01, 1504. Here we do not treat the statute
of limitations. Here, there is no question of imputing any knowledge to anyone else; the
problem here is to identify which party which is entitled to bring a cause of action. The
only two opinions which cite Valenzuela do so only in the context of statutes of limitation.
El Escorial Owners’ Ass'n v. DLC Plastering, Inc, 154 Cal. App. 4th 1337, 1356 (2007); Ne.
Sav., F.A, v. Schreiber, 70 F.3d 1279 (9th Cir. 1995).

Finally, plaintiff invokes the Right to Repair Act, C.C. § 895 et seq. Plaintiff says this
statute expressly grants it the right to pursue the architects now. See generally, Standard
Pac. Corp. v. Superior Court, 176 Cal.App.4th 828, 832 (2009) (discussing some legislative

history). Section 896 imposes “standards” and makes them “actionable”. The statute

5 In Jasmine, it is probable that if that plaintiff had not been able to bring the suit, no one could have, because
it was Jasmine which indisputably suffered the damages, not the later owner. As we saw in Siegel, courts will
not apply the Krusi rule when it would eviscerate the claim altogether, when no one would ever be able to
pursue it.0 mem NY DH RB WY

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creates duties, wholly aside from whether or not warranties or other contractual terms
exist as between contractors (and others) and the home owners. But, as in Krusi, the
precise issue here is not whether such a duty (under § 896, a statutory duty) exists: a duty
existed in Krusi,6 and I assume it exists here under § 896. But that’s not the point:
[A] duty may run from an architect, engineer, or contractor to a subsequent owner
of real property. It does not mean that, in a case implicating damage to such
property, once a cause of action in favor of a prior owner accrues, another cause of
action against the same defendant or defendants can accrue to a subsequent
property owner-unless, of course, the damage suffered by that subsequent owner is

fundamentally different from the earlier type.

Krusi, 81 Cal.App.4th at 1006. The same reasoning applies here.

Conclusion

The motion to strike is granted as to the architect defendants. However the
language at issue probably continues to have significance for the plaintiff, and accordingly
it does not appear necessary to require a further complaint; architect defendants may
respond to the TAC as if the specified language did not apply to them. Ifa party desires
some other order consistent with the reasoning here, it should confer with the other

parties and provide the results to me.

4——>
durtis E.A. Karnow
Judge Of The Superior Court

Dated: October 1, 2014

© Krusi, 81 Cal.App.4th at 1005 (“It is, of course, clear that a tort duty runs from an architect, designer, or
contractor to not only the original owner for whom real property improvement services are provided, but
also to subsequent owners of the same property”).