Court Opinion

ID: 9853250
Source: CourtListenerOpinion
Date Created: 2023-09-24 05:45:04.026618+00
Date Added: 2024-06-11T09:22:43.499224
License: Public Domain

*644CLARK, J., Concurring and Dissenting.
Contrary to the clear legislative intent reflected by Code of Civil Procedure section 337.15, the majority conclude that a contractor may be held liable for alleged improvement defects first asserted more than 10 years after substantial completion of the project. The majority do not hold that the owner may proceed directly against the contractor. Rather they hold that the owner may proceed against the surety and the surety may seek reimbursement from the contractor, thus the contractor is ultimately liable. Such liability—direct or indirect—flies in the face of the legislative intent manifested by section 337.15. Consistent with ordinary principles of common law and statutory construction, we can and should effect the legislative intent.
Section 337.15 is a substantive limitation on right and duty—not a mere procedural limitation on remedy. As to statutes of limitation which are procedural limitations on remedy, I concur in the majority’s determinations that running of the statute on the creditor’s claim against the principal does not bar action against the surety, although I recognize, as reflected by the conflicting cases in California, the question is a close one. I agree with the majority that the surety if compelled to pay may recover reimbursement from his principal. However, when as in the instant case, the statute barring the creditor’s claim against the principal is a substantive limitation on the creditor’s right and upon the principal’s obligation, a duty to reimburse cannot properly be imposed upon the principal. Because the surety will be unable to obtain reimbursement, it is improper to impose liability upon him in such a case.
Section 337.15
Code of Civil Procedure section 337.15 provides: “(a) No action may be brought to recover damages from any person who develops real property or performs or furnishes the design, specifications, surveying, planning, supervision, testing, or observation of construction or construction of an improvement to real property more than 10 years after the substantial completion of such development or improvement for any of the following: [If] (1) 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. [1Í] (2) Injury to property, real or personal, arising out of any such latent deficiency. [U] (b) As used in this section, ‘latent deficiency’ means a deficiency which is not apparent by reasonable inspection. [1] (c) As used in this section, ‘action’ includes an action for indemnity brought against a *645person arising out of his performance or furnishing of services or materials referred to in this section, except that a cross-complaint for indemnity may be filed pursuant to Section 442 in an action which has been brought within the time period set forth in subdivision (a) of this section. [H] (d) Nothing in this section shall be construed as extending the period prescribed by the laws of this state for bringing any action. [H] (e) The limitation prescribed by this section shall not be asserted by way of defense by any person in actual possession or the control, as owner, tenant or otherwise, of such an improvement, at the time any deficiency in such improvement constitutes the proximate cause for which it is proposed to bring an action. [U] (f) This section shall not apply to actions based on willful misconduct or fraudulent concealment.”
The section is not a typical statute of limitation. Ordinarily a statute of limitation reflects legislative determination to permit actions within a certain period, barring the legal remedy thereafter. The statute is procedural, affecting the remedy only—not the substantive right.
However, a “time provision may be so placed or so phrased as to constitute a condition restricting the substantive right rather than a procedural limitation.” (Italics added; 2 Witkin, Cal. Procedure (2d ed. 1970) Actions, § 224, pp. 1082-1083.) Because subdivision (d) provides that the other limitation periods are not extended, section 337.15 serves to terminate right and responsibility. It does not permit actions to be brought within the 10-year period; other statutes of limitation may terminate the right to bring action earlier. Latent defects obviously will often be discovered within a few years of the improvement’s substantial completion, and many actions for latent defects—if not the overwhelming majority—would be barred by other statutes unless brought long before expiration of the 10-year period.
More importantly in this regard, some actions will be barred by section 337.15 before injury or before discovery of the latent defect. The 10-year period will expire before the statutory period to bring action has commenced to run. For example, had there been no dry rot and no discovery of defect within the 10-year period, plaintiff’s action against the contractor would be barred before it arose.
Because of these factors, section 337.15 does not merely bar the remedy but is a substantive limitation on duty. The responsibilities of the contractor are limited to 10 years. Or, as has been said with regard to *646similar statutes, the correlative right upon which suit might have been maintained has expired. (See 2 Witkin, Cal. Procedure, supra, pp. 1088-1090 (cases collected); cf. Estate of Horman (1971) 5 Cal.3d 62, 70 [95 Cal.Rptr. 433, 485 P.2d 785].) Section 337.15 makes clear that there is no right to sue for. a construction defect more than 10 years old except in certain circumstances not relevant here. The section reflects a clear legislative intent that lack of discovery or lack of injury shall not extend the contractor’s responsibility for latent defects and that his responsibility terminates in all events 10 years after the improvement’s substantial completion. (See Balido v. Improved Machinery, Inc. (1972) 29 Cal.App.3d 633, 642 [105 Cal.Rptr. 890] (stating § 337.15 constitutes a legislative pronouncement that causation between defect and injury will not be recognized after the 10-year period).)1
By way of contrast statutes of limitation merely barring the procedural remedy do not terminate all actions once the statutory period has run. Cases recognizing that the cause of action does not arise until the plaintiff discovers or should have discovered the cause of action (see, ante, p. 630) reflect that the diligent plaintiff will be protected. When such statutes bar recovery, the bar is based on lack of plaintiff diligence—not termination of the defendant’s duty or responsibility.2
*647Suretyship Statutes
Civil Code section 2809 provides: “The obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; and if in its terms it exceeds it, it is reducible in proportion to the principal obligation.”
Civil Code section 2810 provides: “A surety is liable, notwithstanding any mere personal disability of the principal. . . but he is not liable if for any other reason there is no liability upon the part of the principal at the time of the execution of the contract, or the liability of the principal thereafter ceases, unless the surety has assumed liability with knowledge of the existence of the defense. . . .” (Italics added.) The liability of the surety is thus ordinarily commensurate with that of its principal (U.S. Leasing Corp. v. duPont (1968) 69 Cal.2d 275, 290 [70 Cal.Rptr. 393, 444 P.2d 65]), and the surety will have a legal right to avail itself of defenses other than personal ones allowed the principal (Flickinger v. Swedlow Engineering Co. (1955) 45 Cal.2d 388, 394 [289 P.2d 214]).
Civil Code section 2847 provides: “If a surety satisfies the principal obligation, or any part thereof, whether with or without legal proceedings, the principal is bound to reimburse what he has disbursed, including necessary costs and expenses; but the surety has no claim for reimbursement against other persons, though they may have been benefited by his act, except as prescribed by the next section.” (The next section, 2848, provides that the surety who pays the principal’s obligations is subrogated to remedies of the creditor and entitled to contribution from co-sureties.)
Relationship of Limitation and Surety Statutes
Ordinary statutes of limitations merely barring the procedural remedy do not reflect a legislative policy to terminate responsibility, rather, as pointed out above, the bar of the statutes is based on lack of plaintiff *648diligence. When the plaintiff has been dilatory in seeking relief from the principal but diligent within statutory periods for seeking relief from the surety, it is proper to hold in accordance with the majority’s view that the plaintiff may proceed against the surety (Bloom v. Bender (1957) 48 Cal.2d 793, 797-798 [313 P.2d 568]; Gaffigan v. Lawton (1934) 1 Cal.2d 722, 723-724 [37 P.2d 79]) in cases where there is no legislative policy precluding reimbursement from the defaulting principal. Obviously, between a plaintiff who has not been as diligent as he should be, a defaulting principal who is solvent, and a diligent surety, the ultimate loss should fall on the defaulting principal, and the surety who pays should be entitled to reimbursement.3 I join in the majority’s disapproval of cases contrary to Bloom and Gaffigan.
However, when clear legislative policy precludes reimbursement because the creditor’s right and the principal’s duty have terminated, there is no justification for holding the surety liable unless the surety by his conduct has enlarged the obligation. Section 2809 makes clear that the obligation of the surety is the same as that of the principal. Although section 2810 permits holding the surety liable notwithstanding a mere personal disability of the principal, it provides that the surety is exonerated when “the liability of the principal thereafter ceases.” When such defense of the principal is not merely procedural but substantive, the surety is entitled to it.4
When the principal’s defense is substantive, it is inequitable to refuse to permit the surety to assert it. Section 2847 provides for reimbursement, and because the surety is entitled to reimbursement, the principal is deprived of his substantive defense if the surety may not assert it. (See Union Bank v. Gradsky (1968) 265 Cal.App.2d 40, 47 [71 Cal.Rptr. 64]; Anderson v. Shaffer (1929) 98 Cal.App. 457, 462 [277 P. 185].) To avoid the inequitable result that a principal having a substantive defense will indirectly be held liable to the creditor, the surety must be permitted to assert the substantive defense.
*649When the contractor’s surety is deprived of the defense furnished by Code of Civil Procedure section 337.15 and required to pay, the surety will in turn be entitled to reimbursement from the contractor under Civil Code section 2847. This is the majority holding. Solvent contractors who have sureties are in effect deprived of the section 337.15 defense and required to pay contrary to the clear legislative intent reflected by the section. There is nothing in section 337.15 indicating that contractors with sureties shall remain responsible for latent defects more than 10 years after the improvement’s substantial completion, and we should not defeat the legislative intent to terminate responsibility. To effect the legislative purpose, I would hold that the surety may assert the contractor’s section 337.15 defense, and affirm the judgment in favor of the surety thereby precluding any need for reimbursement.
Richardson, J., concurred.

Attacking Balido, the majority point out that section 337.15 expressly excludes from its protection owners and tenants and “mentions the liability of laborers and materialmen only in connection with an action for indemnity.” (Ante, p. 642.) Owners and tenants continue to maintain improvements after their substantial completion, and it would be absurd to provide that no action for property damage due to latent defects could be brought against them more than 10 years after substantial completion of the improvement.
As to materialmen and laborers, the majority’s construction of section 337.15 is erroneous. The section in relevant part reads: “(a) No action may be brought to recover damages from any person who . . . furnishes . . . construction of an improvement. . . for any of the following: [If] (1) Any latent deficiency in the . . . construction of an improvement . . . . [H] (2) . . . [H] (c) As used in this section, ‘action’ includes an action for indemnity brought against a person arising out of his performance or furnishing of services or materials referred to in this section, . . .” Because “action” against a person who furnishes construction as used in subdivision (a) “includes,” according to subdivision (c), an action for indemnity against persons furnishing construction services or materials, it must also be read to include direct action for furnishing construction services or materials. The greater must include the lesser. The majority’s conclusion that the section applies only to indemnity actions against laborers and materialmen is another illustration of their failure to interpret the statute in accordance with the obvious legislative intent.

Urging that section 337.15 is not a substantive limitation upon right and duty, the majority point out that the characterization of the statute as substantive has collateral consequences in addition to suretyship doctrine—affecting such matters as choice of law, pleading, and waiver. The majority also point out there is nothing indicating that the Legislature intended the collateral consequences.
The characterization of a statute of limitation as substantive or procedural is always for *647the purpose of determining the collateral consequences. When the Legislature speaks to the collateral matters, there is no need to characterize the statute as procedural or substantive—we follow the express provisions of the statute whether it be a procedural or substantive one. Because it is the failure of the Legislature to specify collateral consequences that requires determination whether the statute is procedural or substantive, the same failure cannot be considered determinative or even of significant importance in deciding whether the statute is substantive. Examination of the cases collected in 2 Witkin, California Procedure, supra, pages 1088-1090, holding limitation statutes substantive, fails to reveal that the statutes expressly dealt with the choice of law, pleading, or waiver.

Payment by the surety extinguishes the principal obligation, and a right of reimbursement then arises. (E.g., W. H. Marston Co. v. Fisheries Co. (1927) 201 Cal. 715, 722-723 [258 P. 933]; Berrington v. Williams (1966) 244 Cal.App.2d 130, 134 [52 Cal.Rptr. 772].) The statute of limitation runs against the claim for reimbursement from the date of payment, not from the date of the original obligation. (Ryland v. Commercial etc. Bank (1900) 127 Cal. 525, 527 [59 P. 989].)

It is not claimed that the surety did anything more than guarantee the obligation of the principal. Nor is it claimed that the surety left the jurisdiction during the limitation period (see Bloom v. Bender, supra, 48 Cal.2d 793), or engaged in any other conduct which should extend its obligation.