Opinion
NOT TO BE PUBLISHED
Appeal from a judgment of the Superior Court of Orange County No. 03CC05924, Derek W. Hunt, Judge.
Carroll & Werner and Lee G. Werner for Plaintiff and Appellant.
Fingal, Fahrney & Clark and Richard L. Fahrney II for Defendant and Respondent.
OPINION
O’LEARY, ACTING P. J.
Civic Plaza Properties II (Civic Plaza) appeals from a summary judgment in favor of Cary Sarnoff. Civic Plaza contends the court applied the wrong statute of limitations and its waste claim against Sarnoff is still viable. We conclude the trial court properly granted the summary judgment, and we affirm the judgment.
I Facts
From 1990 through November 17, 1997, a three-story Santa Ana office building had two owners: (1) Bill and Kathie Gray (collectively referred to as the Grays, unless the content indicates otherwise) owned 50 percent; and (2) Sarnoff and his wife in the name of their Trust owned 50 percent. For several years, Sarnoff’s court reporting company occupied two floors of the building. In 1994, Sarnoff sold his business to Esquire Communications, Ltd. (Esquire) for several million dollars. He was hired as president of the West Coast operation and vice-chairman of the board of directors. Thereafter, Esquire purchased three other court reporting firms and moved those operations into the Santa Ana office building. In 1997, to accommodate the additional employees and equipment, Esquire took additional floor space and made changes and improvements to the building. It is now alleged no building permits were obtained from the City of Santa Ana for the construction work.
On November 17, 1997, Sarnoff sold his 50 percent interest in the property to the Grays. The grant deed transferring his interest in the property to the Grays was executed in 1997, but was not recorded until March 12, 1999. The primary tenant of the property was Esquire, until it filed bankruptcy in 1999. Hobart West Group acquired the business and changed the name slightly to Esquire Deposition Services (Esquire II).
Civic Plaza purchased the property from the Grays in October 2001. Thereafter, Esquire II and Civic Plaza had several disputes regarding the lease. Civic Plaza filed a lawsuit on April 23, 2003, alleging several causes of action against Esquire II, Hobart West Group, and Judy Williams (the property’s manager). It did not name the Grays in the lawsuit. Approximately one year later, it amended the complaint and added Sarnoff and Brian Waite (a building contractor who worked on the building). The only cause of action asserted against these new Doe defendants was the fifth cause of action for waste.
Hobart West Group and Esquire II filed a motion to strike Civic Plaza’s waste action as a discovery sanction. The court struck the waste causes of action as to all defendants, including Sarnoff. Civic Plaza challenged this decision on appeal and prevailed. (Civic Plaza Properties II v. Gary Sarnoff (Oct. 20, 2005, G034467) [nonpub. opn.].) While the appeal was pending, Civic Plaza reached a settlement with Esquire II, Hobart West Group, and Williams.
After the case was remanded, Civic Plaza filed a peremptory challenge against the previously assigned trial judge, and the case was reassigned to Judge Derek W. Hunt. After Sarnoff’s demurrer was sustained and a second amended complaint was filed, all that remained was the waste cause of action against Sarnoff and Waite. It was alleged, “Within the past [10] years, defendants have caused injury to the premises by committing waste thereon by their actions in planning, designing, and constructing substantial improvements to the subject property without ever applying for or obtaining a permit . . . from the City of Santa Ana. [¶] As a proximate result of [this] . . . conduct, the subject property has suffered a diminution of value, in an amount to be determined according to proof.”
At the hearing on Sarnoff’s second demurrer, the court overruled it, but warned Civic Plaza, “I can tell you right now . . . at trial, which is coming up, I am not going to permit any evidence of waste which supposedly occurred at the hands of . . . Sarnoff or by anybody else before that acquisition date, October 2001 . . . .”
The following month, the court granted Sarnoff’s motion for summary judgment, concluding the waste claim was barred entirely by the statute of limitations. It subsequently dismissed Waite from the lawsuit. Civic Plaza appealed both rulings, but then dismissed its appeal regarding Waite. Consequently, the only issue before us on appeal is whether summary judgment was properly granted as to the waste claim against Sarnoff.
II Discussion
1. Standard of Review
“The purpose of the law of summary judgment is to provide courts with a mechanism to cut through the parties’ pleadings in order to determine whether, despite their allegations, trial is in fact necessary to resolve their dispute. [Citation.]” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843 (Aguilar).) “We review the trial court’s decision de novo, considering all of the evidence the parties offered in connection with the motion (except that which the court properly excluded) and the uncontradicted inferences the evidence reasonably supports.” (Merrill v. Navegar, Inc. (2001) 26 Cal.4th 465, 476.) A defendant moving for summary judgment “bears the burden of persuasion that ‘one or more elements of’ the ‘cause of action’ in question ‘cannot be established,’ or that ‘there is a complete defense’ thereto. [Citation.]” (Aguilar, supra, 25 Cal.4th at p. 850.) To accomplish this burden of persuasion, the moving party “bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact; if he carries his burden of production, he causes a shift, and the opposing party is then subjected to a burden of production of his own to make a prima facie showing of the existence of a triable issue of material fact.” (Ibid.) “A prima facie showing is one that is sufficient to support the position of the party in question.” (Id. at p. 851.)
2. The Summary Judgment Motion
Sarnoff moved for summary judgment, arguing inter alia, the waste claim was barred by the three-year statute of limitations. (Code Civ. Proc., § 338, subd. (b).)
Sarnoff, who was sued in his individual capacity, presented evidence he could not be sued for waste because he was not in lawful possession of the property anytime after 1997 (when he sold his ownership interest to the Grays). Thereafter, Sarnoff worked as Esquire’s employee. Sarnoff declared he had never personally been a tenant of the property. Based on these facts, Sarnoff asserted the three-year statute of limitations was triggered no later than 1997, and would have expired in 2000 (well before Civic Plaza purchased the property). He argued Civic Plaza could not state a claim for waste occurring before it purchased the property. Moreover, any waste claim could not have been transferred from the Grays to Civic Plaza, which bought the property in an “as is” condition.
Sarnoff also presented evidence he was not responsible for any waste to the building. In his declaration, Sarnoff stated he did not supervise the construction work and he did not know about the lack of permits for any work done between June 1994 and November 17, 1997 (the date Sarnoff sold his interest in the property to the Grays).
In addition to his own declaration, Sarnoff submitted Bill Gray’s deposition testimony to support his claim no waste had occurred. Gray testified he knew Waite was hired to work on the building’s improvements, but Gray was unaware of any complaints about it. He recalled there were substantial upgrades and tenant improvements done for Esquire. Gray stated the building was “in good shape” when he sold it and “[a]nytime anything needed to be done on the building either . . . Williams or someone else at Esquire would arrange to have it done . . . .” Gray stated he was unaware of any claims with respect to the condition of the building when he sold it to Civic Plaza.
In its response, Civic Plaza claimed the waste arose out of a latent deficiency and, therefore, the 10-year statute of limitations found in section 337.15 applied. It explained, “The injury to the subject property as the result of the defendants’ actions in planning, designing, and installing substantial improvements . . . which did not meet the prevailing standards (and which were not inspected or approved by the City of Santa Ana) was not apparent from a reasonable inspection of the property.” It submitted declarations from the general partner of Civic Plaza, Mohammed Ghods, and Lee Werner, Civic Plaza’s attorney.
Ghods declared he purchased the property from the Grays in October 2001, and based on his discussions with them, he believed he had obtained all personal property rights, which would necessarily cover the right to sue for waste. Ghods stated he discovered sometime “prior to filing the action” that much of the reconfiguration work was done in 1997 without the appropriate permits. He claimed Civic Plaza had incurred costs to remedy some of the problems associated with the illegal work and the value of the property has been diminished. However, he provided no supporting documentation describing or verifying the alleged repairs. Ghods submitted several pages of permit sheets he claimed were obtained from the city. He opined these documents prove no permits were obtained for the improvements.
Werner’s declaration contained excerpts from Sarnoff’s, Williams’s and Waite’s depositions. In the separate statement of disputed facts, these depositions were cited as proof there existed a dispute as to whether both Sarnoff and Gray “had any knowledge of any waste or lack of care or maintenance for the improvements to the [s]ubject [p]roperty . . . .” Werner argued in his declaration that Bill Gray’s deposition was not admissible because it was taken six days before the initial trial date.
At the hearing, the court determined Civic Plaza’s cause of action accrued when it took title to the property in April 2001. It determined the general “fall back” four year statute of limitations found in section 343 applied, and because Civic Plaza filed its lawsuit in April 2003, the claim depended on evidence Sarnoff committed waste within the past four years (after April 1999). It determined Sarnoff had successfully shifted the burden of proof to Civic Plaza based on the undisputed evidence he was neither a tenant nor an owner after April 1999—a necessary element of a waste claim. Sarnoff had provided proof he sold his rights to the property in November 1997, and the grand deed was filed March 1999.
The court determined Civic Plaza had not satisfied its burden of raising a triable issue of fact. Ghods’s declaration confirmed Sarnoff did not own the building when Civic Plaza purchased it in April 2001. The court found nothing in Werner’s or Ghods’s declarations to suggest Sarnoff was a person who could be sued for waste occurring after April 1999. There was nothing to contradict Sarnoff’s claim he was simply a tenant’s employee and he had no legal possessory right to the property.
Near the end of the hearing, Civic Plaza attempted to argue a point it conceded was not raised in its opposition. Civic Plaza cited several cases discussing the delayed discovery rule, and argued the waste cause of action in this case did not accrue until Ghods discovered the work lacked permits. The court stated, “I spent a lot of time on your papers and I think I anticipated, at least I endeavored to anticipate, the argument that [Civic Plaza’s counsel] was making. . . . I’m not persuaded that the statute of limitations argument has been sufficiently challenged by [Civic Plaza] as to raise a triable issue of fact that would go to the fact finder. So I am going to grant the summary judgment motion . . . .”
On appeal, Civic Plaza asserts the court erred in not applying the 10-year statute of limitations under section 337.15. Alternatively, it argues the three-year (§ 338) or four-year (§ 343) limitation periods were tolled pursuant to the delayed discovery rule.
3. What Statute of Limitation Applies to this Waste Claim?
As noted by the Supreme Court in Cornelison v. Kornbluth (1975) 15 Cal.3d 590, 598, “The action for waste originated in the early common law sometime during the 12th century. Initially, it was designed to protect owners of succeeding estates of inheritance from the improper conduct of the person in possession which harmed the property. As the action evolved during the ensuing development of the common law, it was broadened so as to afford protection to concurrent holders of interests in land who were out of possession . . . from harm committed by persons who were in possession . . . .” It stated, “‘[W]aste is conduct (including in this word both acts of commission and of omission) on the part of the person in possession of land which is actionable at the behest of, and for protection of the reasonable expectations of, another owner of an interest in the same land. . . . Thus, waste is, functionally, a part of the law which keeps in balance the conflicting desires of persons having interests in the same land.’ [Citation.]” (Id. at pp. 597-598.) “‘“‘[W]aste’ can only be proved, with the possible exception of a few instances, by evidence of acts which injuriously affect the market value of the property.”’ [Citations.] Proof of ‘conduct which has resulted in substantial depreciation of the market value of land’ establishes waste. [Citation.]” (Smith v. Cap Concrete, Inc. (1982) 133 Cal.App.3d 769, 775-776.)
Although section 732 recognizes a cause of action for waste, the definition of waste has been developed under the common law, and the general limitation laws relating to actions for injuries to real property generally applies. Section 338, subdivision (b), provides that “[a]n action for trespass upon or injury to real property[]” must be brought within three years. Because an action for waste requires “physical injury to the land itself” (Dieterich Internat. Truck Sales, Inc. v. J.S. & J. Services, Inc. (1992) 3 Cal.App.4th 1601, 1610), section 338, subdivision (b), is ordinarily the applicable statute of limitations. (See Galen v. Mobil Oil Corp. (C.D.Cal. 1996) 922 F.Supp. 318, 323, fn. 7.)
The purpose of the 10-year statute of limitations (§ 337.15) is to protect contractors and other professionals in latent construction defect actions. (Acosta v. Glenfed Development Corp. (2005) 128 Cal.App.4th 1278, 1294.) “In Regents of University of California v. Hartford Acc. & Indem. Co. (1978) 21 Cal.3d 624 . . . and Liptak v. Diane Apartments, Inc. (1980) 109 Cal.App.3d 762 . . ., the courts explained the interplay between section 337.15 and sections 337 and 338. When a defect is latent (i.e., not apparent from a reasonable inspection [citation]), 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. [Citation.] However, section 337.15 imposes an absolute 10-year bar, based on the date of ‘substantial completion,’ regardless of discovery. [Citation.] The interplay between these statutes sets up a two-step process: (1) actions for a latent defect must be filed within three years (§ 338) or four years (§ 337) of discovery, but (2) in any event must be filed within ten years (§ 337.15) of substantial completion. [Citation.]” (North Coast Business Park v. Nielsen Construction Co. (1993) 17 Cal.App.4th 22, 27.)
However, section 337.15, subdivision (a)(1), specifies its limitation period only applies to actions brought after the substantial completion of an improvement for: “Any latent deficiency in the design, specification, surveying, planning, supervision, or observation of construction or construction of an improvement to, or survey of, real property.” We conclude it is inapplicable to the claim raised in this case. Setting aide for a moment the question of whether the “lack of a permit” was latent or hidden from reasonable inspection, we have determined Civic Plaza failed to prove nonpermitted work qualified as a “deficiency” as intended by the statute.
By all accounts in this case, the construction work and improvements were made openly and over a lengthy period of time. It is undisputed that in 1997, four or five walls were removed, some walls were added, at least one door was cut through, and “one big open area” was created for the tenant Esquire to expand its operations. There is nothing to suggest the construction or lack of permitting was hidden from anyone.
Sarnoff submitted evidence he was unaware of any defective workmanship, substandard work, or any damage to the property “that could be described as a misuse, alteration or neglect” of the property. Thus, the burden shifted to Civic Plaza to prove the alleged harm was a deficiency as described in section 337.15. However, there was no evidence about what exact injury was caused by the lack of permits. Civic Plaza does not make any specific complaints about the “design, specification, surveying, planning, supervision or observation of construction” regarding the 1997 improvements. Although Ghods generally asserted in his declaration that Civic Plaza “incurred costs to remedy some of the problems,” he failed to describe the problems or describe how they related to the lack of permits. Moreover, Ghods’s lay opinion that the lack of permits obviously diminished the value of the property is insufficient. There was no evidence the workmanship or materials used in the improvements were substandard or would not have satisfied the permit requirements. We reject Civic Plaza’s contention the lack of city work permits necessary equates to building “deficiencies” as defined in section 337.15. Based on all the above, we conclude only the three-year statute of limitations applied to this waste action.
4. Application of the Three-Year Statute of Limitations Bars the Waste Claim.
“‘A cause of action accrues at the moment the party who owns it is entitled to bring and prosecute an action thereon. [Citations.]’ [Citations.] That is said to occur when ‘. . . events have developed to a point where plaintiff is entitled to a legal remedy, not merely a symbolic judgment such as an award of nominal damages.’ [Citation.]” (Keru Investments, Inc. v. Cube Co. (1998) 63 Cal.App.4th 1412, 1423.)
Under this definition of accrual, a tort cause of action based solely on the lack of proper city permits would arise when the nonpermitted construction work was completed. The evidence established the construction was completed in 1997. At the time, the building was owned by Sarnoff and the Grays. If we assume for the sake of argument that Sarnoff was responsible for the remodeling done without the permits, then the Grays were entitled to bring and prosecute a waste action against him up until November 1997.
Therefore, under the three-year statute of limitations (§ 338), the action would be time-barred at the latest by November 2000. Absent a reason to toll the statute of limitations, a waste action filed in April 2004 was properly barred as untimely.
5. Was the Statute of Limitations Tolled?
“The ‘discovery rule’ assumes that all conditions of accrual of the action—including harm—exist, but nevertheless postpones commencement of the limitation period until ‘the plaintiff discovers or should have discovered all facts essential to his cause of action [citations],’ which is to say ‘when “plaintiff either (1) actually discovered his injury and its negligent cause or (2) could have discovered injury and cause through the exercise of reasonable diligence [italics added].” [Citations.]’ [Citations.] The rule is ‘based on the notion that statutes of limitations are intended to run against those who fail to exercise reasonable care in the protection and enforcement of their rights; therefore, those statutes should not be interpreted so as to bar a victim of wrongful conduct from asserting a cause of action before he could reasonably be expected to discover its existence. [Citations.]’ [Citation.] The rule has been applied in tort actions of various kinds, including cases which involve nonobvious (or latent) injuries to real property. [Citations.]” (Camsi IV v. Hunter Technology Corp. (1991) 230 Cal.App.3d 1525, 1536-1537.)
The discovery rule was not briefed by the parties below, but was raised by Civic Plaza at the end of the hearing. On appeal, the parties spend a considerable amount of time arguing the point, but we are limited to the record below. In short, we find Civic Plaza did not present evidence sufficient to invoke the delayed discovery rule.
In its appellate briefs, Civic Plaza repeatedly stated the Grays “did not know of Sarnoff’s illegal nonpermitted work.” However, Civic Plaza has apparently forgotten that in its separate statement below it disputed material fact number 8, claiming there was evidence “Sarnoff and [Bill] Gray” knew about the improvement projects and also were aware of the waste. (Italics added.) This is not a case in which the construction work contained hidden flaws or defects. Just as Ghods had no trouble finding the City of Santa Ana permit records for the building, the Grays could have done the same thing anytime during the construction or before they acquired the building from Sarnoff.
Civic Plaza offered only two record citations to support this contention, and they both fall short of proving anything dispositive. Both citations are taken from Sarnoff’s deposition testimony in which he admitted he did not communicate to the Grays (1) the rental space needs of Esquire “when it acquired” the other court reporting companies, or (2) when “improvements would be undertaken.” Neither statement qualifies as a complete admission.
In light of the opposition papers, it is understandable why the trial court quickly rejected Civic Plaza’s last minute argument the discovery rule applied. For the rule to apply, Civic Plaza had the burden below of proving the Grays’s inability to have made an earlier discovery despite reasonable diligence. It failed to do so. Civic Plaza is not entitled to a second bite at the apple on appeal.
We find disingenuous Civic Plaza’s reply brief argument suggesting that perhaps Sarnoff never sold the property to the Grays. It points to the fact the deed states the acquisition was for no consideration, and to the fact the Grays waited several years before recording the deed. But in its separate statement, Civic Plaza submitted it was “undisputed” that “[o]n November 17, 1997, Sarnoff sold” his interest in the property to Gray. It is far too late in these proceedings for Civic Plaza to change its mind about this particular fact.
In conclusion, the alleged waste due to the illegal construction expired in 2000. The court properly concluded the claim was time-barred, and we affirm the summary judgment.
III Disposition
The judgment is affirmed. Respondent shall recover his costs on appeal.
WE CONCUR: ARONSON, J., IKOLA, J.