In Stofer v. Shapell Industries, Inc., the California First District Court of Appeal recently held that when the determination of standing in the construction defect context turns on disputed facts or requires credibility determinations, the jury must make factual findings as to whom the cause of action accrued before the court can decide whether the facts, as determined by the jury, establish ownership of the causes of action as an issue of law.
In Stofer, a developer built a home for its own vice president of construction in 2002. In 2004, the vice president sold the home to a second homeowner, who eventually sold the home to the plaintiff in 2008. In 2010, the plaintiff sued the developer, alleging defective soil conditions heaved the home’s foundation and damaged all of the structures on the lot.
Prior to construction of the home, the developer hired a soils engineer, who advised the developer of high plasticity fill soil conditions at the property. The complaint alleged the developer concealed this information from its structural engineer and, as a result, the structural engineer did not take the soils conditions into account when designing the foundations. Failure to account for the soil conditions allegedly caused damage to all structures on the lot. According to the plaintiff, these conditions were not disclosed to any of the homeowners in the chain of title. Several such factual allegations were disputed by the parties.
The developer argued that the plaintiff did not have standing for a fraudulent concealment cause of action because the second homeowner was the true owner of that cause of action. The second homeowner observed defects that may have been caused by the soils conditions and took corrective measures to patch the visible damage. The developer argued that this constituted inquiry notice of the soils defects, which triggered accrual of the fraudulent concealment cause of action in the second homeowner and prevented plaintiff from asserting such a cause of action. The trial court agreed, held a bench trial on the issue of standing, and entered judgment for the developer.
On appeal, the Court acknowledged that a trial court may decide whether a cause of action for construction defect accrues to the plaintiff where the facts underlying that determination are undisputed. However, the Court held that, as in this case, when the material facts regarding accrual turn on disputed facts or require credibility determinations, the jury must make such factual findings before the trial court decides whether the facts establish ownership of the causes of action as an issue of law.
The Court’s holding favored the plaintiff’s right to a jury trial over administrative efficiency and judicial economy concerns. The decision could be significant as it may prevent developers from adjudicating standing via summary judgment whenever the plaintiff is able to create a disputed fact or credibility issue.
