Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Kern County. No. S-1500-CV-257092, William D. Palmer, Judge.
Gibson & Gibson, Edward Gordon, John Gibson; Law Offices of Christopher Rolin and Christopher Rolin for Plaintiffs and Appellants.
Alexander & Associates and William L. Alexander for Defendants and Respondents.
OPINION
Cornell, Acting P.J
Appellants Robert and Tanya Tluchak (the Tluchaks) appeal an award of damages arising out of the defects in the construction of their custom home by Gold Crest Construction, Inc., a California corporation (Gold Crest). They contend (1) the trial court erred in denying alter ego and joint and several liability as to Bryan Hill (Hill); (2) the trial court erred in the denial of the personal reason exception when determining damages; (3) the damage award was not supported by substantial evidence; and (4) the trial court exhibited bias against the Tluchaks.
We will uphold the denial of alter ego and joint and several liability as to Hill, but reverse the damage award.
FACTUAL AND PROCEDURAL SUMMARY
On February 1, 2004, the Tluchaks entered into a contract with Gold Crest for the construction of a custom home to be built on Southworth Court in Bakersfield. The contract was negotiated by Hill, the responsible managing officer (RMO) of Gold Crest. His wife, Stephanie, was the president of Gold Crest. Gold Crest had no other employees. Hill personally oversaw the construction of the home.
During construction, the Tluchaks complained about problems with the construction. Eventually, the residence passed inspection by the City of Bakersfield’s building department prior to transfer of the house to the Tluchaks. During a walk-through, the Tluchaks noted various defects and items needing repair. The Tluchaks closed escrow on December 10, 2004, and purchased the house for $581,222. Gold Crest provided a one-year warranty.
After close of escrow, Gold Crest claimed that it completed many repairs and in other instances the Tluchaks prevented Gold Crest from completing the necessary repairs. Additionally, Gold Crest maintained that many of the defects were excluded by Gold Crest’s new-home warranty, which was provided to the Tluchaks after they entered into the contract.
Eventually, the Tluchaks filed a complaint in December 2005 alleging causes of action for negligence, building code violations, strict liability, breach of implied warranty, misrepresentation, breach of contract, breach of the implied covenant of good faith and fair dealing, and emotional distress. An answer to the complaint was not filed until December 16, 2006.
In their briefs, the parties refer to facts and procedural matters without citing to any record reference. Because the parties agree on the procedural posture of this case, we will accept their statements as set forth in their briefs.
The matter was scheduled for a bench trial on November 13, 2007, which was continued to November 14, 2007, and then again to December 6, 2007. On December 6, 2007, the trial court continued the case to March 24, 2008.
At trial, Tanya Tluchak testified to the numerous problems they had with the house after moving in, including a hot water heater that did not work, the central heat did not work, the roof leaked in her daughter’s bedroom and the dining room, and the leaky roof damaged the house alarm system. Tanya Tluchak detailed the numerous problems, small and large, with the home and their attempts to have Gold Crest fix the problems. She also attempted to testify regarding the estimated cost to repair the damage based upon written estimates she had from Bakersfield contractors, but Gold Crest objected and the trial court sustained the objection.
Michael Jundt, a licensed structural engineer, testified that the Tluchak home had serious structural defects. Jundt opined that the structural defects included cut truss plate connectors and top cord members, sagging fascia, damaged and intentionally modified truss connectors, roof defects affecting 50 percent of the roof, and widespread areas of soft plaster in the walls.
Jundt stated that the truss connector plates were installed in locations or positions that were “out of conformance with typical good practices for truss construction.” Several trusses had been deliberately cut, which was prohibited by manufacturer specifications. There was “unusual unevenness in the garage” and the “roof sagged.” The headers were improperly designed, overstressed, and could be expected to fail. The roof had a “waviness” as determined by a straight edge. The waviness was caused by failure to secure the lateral braces and trusses properly. Jundt found areas in the roof where there were “no nails from all sides.”
Jundt opined that if the structural defects were not corrected, the problems would continue to get worse over time, leading to failure of the framing. The sheer walls were not connected to the roof diaphragm. The roof was not installed according to code and to correct the defects would require removal of at least 50 percent of the roof.
When Jundt examined the interior, he noted areas where the tubs had not been installed properly, leading to water leakage and mold growth; pantry shelves were installed incorrectly and would not support expected weight; there were leaks around windows; and tile and grout cracking indicated that the foundation was cracking. Jundt also noticed that the plaster color was uneven.
Jundt also examined the walls, which were plaster. He tested the walls in 203 locations. Of those 203 locations, the plaster was of the proper hardness in only 127. The remaining areas tested at medium hard to very soft, with 34 locations testing “very soft.” Jundt opined that the plaster was too thin and not hydrated properly, which caused it not to cure to the proper hardness. The plaster was not of the thickness called for in the manufacturer’s specifications. The plaster samples were like a “hard dirt clot.” Jundt stated there was no way to repair the stucco safely except to remove it and properly replace it.
James Lamb, who works as an expert witness for the California Department of Consumer Affairs on contractor complaints, also testified. Lamb worked as a cement contractor, building contractor, and home designer for 40 years before retiring and working for the state. The Contractors’ State License Board asked Lamb to inspect and “report” on the project. As part of his research for the report, Lamb obtained estimates for the cost to repair the defects. Lamb inspected the property, took pictures, met with Tanya Tluchak regarding her complaints about the property, and prepared a report.
Lamb testified he used the national construction estimator, contacted different contractors and got verbal prices on the cost to repair, and also did his own evaluation of cost. Lamb detailed additional areas of poor workmanship needing repair, other than those noted by Jundt, including (1) the front entry tile, which was not “straight and plumb”; (2) improperly installed tile in the master bedroom that was uneven and sagging; (3) two showers that were not plumbed and the doors would not close properly; (4) tubs installed incorrectly; (5) patio columns needed replacing; (6) front doors were cracked and the wood mismatched; (7) pocket sliding doors that were damaged when drywall was installed; and (8) no wiring for the home speaker system that was installed.
Lamb opined that installation of much of the work was not done according to the plans for the house. Additionally, Lamb noted that in all the areas he found that needed repair, the workmanship did not meet minimum acceptable trade standards. Using a list of the needed repairs that Lamb developed from his inspection, Lamb estimated the repairs would cost $362,409. Lamb opined that he factored in a cost to remove the improperly installed items, obtain replacement materials, and install materials correctly. Although Lamb did not obtain formal written bids for the work, he did talk to different contractors and suppliers and obtained verbal estimates from them, in addition to using the California construction estimator, in forming his opinion.
John Ulman testified on behalf of Gold Crest. He was a general contractor who did “commercial construction,” was “real strong in the auto industry,” and did “some residential.” Since 1984, Ulman had worked “daily” in the “auto industry.” During that same time period, Ulman estimated approximately 10 percent of his revenue came from working on “ultra high end” residential homes, but acknowledged that he had not worked on any homes “at the level of” the Tluchaks’ home for a period of several years. Ulman acknowledged he was high school friends with Gold Crest’s counsel, the two of them saw each other regularly at the country club to which they both belonged, and Ulman used the same attorney as Gold Crest.
Ulman testified that the cost of “necessary repairs” was “[p]lus or minus $50,000.” Ulman arrived at this figure by going through the list prepared by one of the Tluchaks’ “consultants,” apparently Lamb’s list, and suggesting items that “may not need any attention.” Ulman’s figures had been prepared a year before trial and were Bakersfield rates.
Ulman opined that the structural engineer, Jundt, gave a “rather extensive report,” with which Ulman did not agree. Ulman opined that Jundt was a “conservative engineer” and, with respect to some defects noted by Jundt, Ulman could not “figure out how he even knows that.” Ulman stated the roof did not need to be replaced, although he had not been on the roof to inspect it. On the stucco, Ulman disagreed with Lamb and Jundt that some of it needed replacing. Ulman felt that the stucco did not “all need to be removed” and that “recoloring the whole house” would solve the problem of the defects in the stucco. Ulman did acknowledge that he never had “occasion to replace a complete stucco installation.”
On other items noted by Lamb, Ulman again disagreed and opined that entry doors, the tile, any color match issues, surround sound system, and foundation cracks did not need attention. Ulman stated that any mismatched items could simply be painted over or dyed and other items were not readily visible. As for items like plumbing, sinks and medicine cabinets that had been installed incorrectly or unevenly, Ulman opined that “they work” and therefore did not need to be fixed. Ulman also opined that there could be “efficiencies” by hiring someone to do “more than one job at once.”
Jeremy Jans, a certified residential real estate appraiser, appraised the Tluchak home at $855,000 as of April 26, 2007. Jans acknowledged that he was not an inspector and did not take into account any code violations or other alleged defects in fixing a value. Jans acknowledged that he was asked to appraise the house as though it were in “perfect condition,” but also said he did not know of any “readily observable” defects.
The Tluchaks attempted to present rebuttal evidence, countering Ulman’s testimony, regarding cost of repairs based upon bids obtained from Bakersfield-area contractors. They informed the trial court they had “obtained local contractors on all of the trades that are at issue in this case in the community.” They asked to allow Jundt to testify again and perhaps Lamb.
Gold Crest objected that the proffered evidence would be “entirely hearsay” and, in any event, had not been “produced in discovery.” Gold Crest again reiterated that the “pure hearsay” should not be admitted.
The trial court stated that “hearsay can properly come in through an expert.” The trial court went on to state, however, that an expert simply cannot “parrot the opinion of … another expert or of someone else.” The trial court also opined, “I’m not sure it’s going to be that helpful.”
The Tluchaks’ counsel responded that Ulman had criticized Lamb’s testimony and estimates as not “using Bakersfield contractors” or “efficiency” methods and the Tluchaks wanted to counter this testimony. If not through Lamb or Jundt, then counsel argued that the “homeowner was entitled to do that as part of his permissible lay opinion.”
The trial court concluded that further evidence on the cost of repair using Bakersfield bid prices would not be “true rebuttal” evidence and excluded the evidence. The trial court further stated that even if it were rebuttal evidence, a nonexpert’s opinion could not be used to fortify an expert’s opinion. The nonexpert apparently was a reference to the Tluchaks wanting to testify.
On May 22, 2008, the trial court issued its tentative decision, apparently following Ulman’s approach to damages and awarding the Tluchaks $29,822. The trial court expressly found the Tluchaks and the experts who testified on their behalf not credible. On May 29, 2008, the Tluchaks requested a statement of decision.
On June 24, 2008, the trial court adopted the proposed statement of decision submitted by counsel for Gold Crest. Objections to the statement of decision were filed on July 14, 2008. A hearing on the objections was held on August 15, 2008. On August 26, 2008, the trial court overruled the objections and ordered judgment entered against Gold Crest and in favor of the Tluchaks in the amount of $29,822.
The Tluchaks moved for a new trial. Their motion for new trial was denied. Thereafter, the Tluchaks filed an appeal.
On March 10, 2009, the Tluchaks filed with this court a request for judicial notice, asking that we take notice of several documents filed with the Kern County Assessor/Recorder’s Office and various other documents. By order dated April 2, 2009, we deferred ruling on the motion pending consideration of the merits of the appeal.
DISCUSSION
The trial court awarded judgment for the Tluchaks based on the tort causes of action for property damage. It found that the Tluchaks could not recover on the contract and warranty causes of action because the house increased in value. It was not disputed in the trial court, nor is it here, that Gold Crest is liable for damages; just the amount is in dispute. The Tluchaks argue they are entitled to the costs of repair from Gold Crest and Hill under the personal reason exception, so the value of the house is irrelevant. Gold Crest and Hill claim that only Gold Crest is liable and only in the amount of the property damages.
We now proceed with the specific contentions. The Tluchaks contend the trial court committed several errors: (1) the trial court erred in refusing to hold that Hill should be personally liable for the damages to their home; (2) the trial court erred in denying the personal reason exception, thereby declining to award cost of repair damages; (3) the award of damages was not supported by substantial evidence; and (4) the trial court erroneously excluded rebuttal testimony. Additionally, the Tluchaks contend the trial court exhibited bias in its rulings and treatment of the Tluchaks.
1. Personally Liability of Hill
The Tluchaks’ first contention is that Hill and Gold Crest are alter egos and the trial court erred in refusing to impose joint and several liability on Hill for the damages. We disagree.
The alter ego theory applies where an abuse of the corporate privilege justifies holding the equitable ownership of a corporation liable for the actions of the corporation. (Roman Catholic Archbishop v. Superior Court (1971) 15 Cal.App.3d 405, 411 (Roman Catholic Archbishop).) Two requirements must be met to prove alter ego status: (1) the existence of a unity of interest and ownership such that the separate personalities of the corporation and the shareholders no longer exist, and (2) the existence of an inequitable result if the acts in question are treated as those of the corporation alone. (Automotriz etc. De California v. Resnick (1957) 47 Cal.2d 792, 796 (Automotrize); Hennessey’s Tavern, Inc. v. American Air Filter Co. (1988) 204 Cal.App.3d 1351, 1358.)
In practice, the alter ego doctrine is considered a drastic remedy because such a basis of liability is fundamentally at odds with the general rule that a de jure corporation is a legal entity separate from its founders and owners. (Las Palmas Associates v. Las Palmas Center Associates (1991) 235 Cal.App.3d 1220, 1249 (Las Palmas Associates) [the law specifically permits owners to incorporate a business for the very purpose of shielding them from its liabilities].) It is available whether the alleged alter ego is a corporation or an individual. (McLoughlin v. L. Bloom Sons Co., Inc. (1962) 206 Cal.App.2d 848, 851.) Thus, the doctrine, if successful, results in a disregard of the corporate entity.
The alter ego doctrine promotes justice and prevents unfairness by precluding persons or entities who are the alter egos of a sham corporation from escaping liability for its debts. (Mesler v. Bragg Management Co. (1985) 39 Cal.3d 290, 301 (Mesler); Hiehle v. Torrance Millworks, Inc. (1954) 126 Cal.App.2d 624, 629.) “Alter ego is a limited doctrine, invoked only where recognition of the corporate form would work an injustice to a third person. [Citation.]” (Tomaselli v. Transamerica Ins. Co. (1994) 25 Cal.App.4th 1269, 1285 (Tomaselli).) “[O]ur state Supreme Court has stated the corporate form will be disregarded only in narrowly defined circumstances and only when the ends of justice so require. [Citation.]” (Communist Party v. 522 Valencia, Inc.(1995) 35 Cal.App.4th 980, 995.)
The doctrine is easy to articulate but difficult to apply and depends on the factual circumstances of each case. (Talbot v. Fresno-Pacific Corp. (1960) 181 Cal.App.2d 425, 432; Las Palmas Associates, supra, 235 Cal.App.3d at p. 1248.) “Among the factors to be considered in applying the doctrine are commingling of funds and other assets of the two entities, the holding out by one entity that it is liable for the debts of the other, identical equitable ownership in the two entities, use of the same offices and employees, and use of one as a mere shell or conduit for the affairs of the other.” (Roman Catholic Archbishop, supra, 15 Cal.App.3d at p. 411, citing Associated Vendors, Inc. v. Oakland Meat Co. (1962) 210 Cal.App.2d 825, 838-839 (Associated Vendors).) Other factors that have been described in the case law include inadequate capitalization, disregard of corporate formalities, lack of segregation of corporate records, and identical directors and officers. (See Associated Vendors, at pp. 838-840; Tomaselli, supra, 25 Cal.App.4th at p. 1285.)
It is not enough, however, that the judgment debtor has disregarded corporate or partnership formalities and has treated all affiliated entities as one. Instead, in order to impose alter ego liability, the trial court must find that failure to impose such liability will lead to an “inequitable result” (Automotriz, supra, 47 Cal.2d at p. 796) or “foster an injustice” (Gordon v. Aztec Brewing Co. (1949) 33 Cal.2d 514, 522).
Here, the evidence established that Gold Crest’s initial capitalization “may have been between 10 or $20,000” and that the entity operated out of Hill’s personal residence. Gold Crest’s capitalization was less at the time of trial than it had been in 2003-2004. At the time of trial, Gold Crest had no assets other than a “spec house” in Seven Oaks. Hill testified that a corporate minute book was kept; he and his wife held annual corporate meetings; and minutes of the annual meetings were kept.
There was no evidence presented, however, to show that Hill and Gold Crest disregarded corporate formalities by commingling personal and corporate funds, failing to maintain corporate records, or intermingling corporate and personal records. Hill’s testimony regarding corporate meetings and minutes established that he and his wife adhered to the minimum requirements needed to demonstrate that Gold Crest was a separate corporate entity.
The Tluchaks had the burden of producing sufficient evidence to establish that Hill was the alter ego of Gold Crest. The record evidence falls short of that required for imposition of this drastic remedy. (See Las Palmas Associates, supra, 235 Cal.App.3d at p. 1249; Associated Vendors, supra, 210 Cal.App.2d at pp. 838-840; Tomaselli, supra, 25 Cal.App.4th at p. 1285.) Imposition of alter ego liability is an extreme remedy to be used sparingly. (Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523, 538-539.) The evidence established that Hill and his wife were operating a classic “mom and pop” corporation and adhering to the minimum requirements to establish that Gold Crest was a separate entity.
Hill was the RMO for Gold Crest. The Tluchaks contend this makes him jointly and severally liable for the debts of the corporation, even absent application of an alter ego theory. Although a corporation applying for a contractor’s license must qualify through an RMO who is eligible for that license, there is nothing in the statute, and the Tluchaks have cited no case law, that states as a matter of law an RMO and the corporation are alter egos or that an RMO is jointly and severally liable for corporate debt. (Bus. & Prof. Code, § 7068, subd. (b)(3); WSS Industrial Construction, Inc. v. Great West Contractors, Inc. (2008) 162 Cal.App.4th 581, 588.)
Further, contrary to the Tluchaks’ assertion, Hill’s being the RMO for Gold Crest does not make him the general contractor. The Tluchaks have cited no authority for this proposition. The general contractor on the project was Gold Crest, and nothing in the judgment absolved Gold Crest of liability for defects and damages caused by subcontractors.
II. Application of the Personal Reason Exception
The Tluchaks contended in the trial court that they were entitled to the personal reason exception when determining damages. The trial court refused to allow the exception. This contention is important because normally the Tluchaks would be entitled to the lesser of the cost of repair or the diminution in the value of the residence on the breach of contract and warranty causes of action.
We review the trial court’s ruling using the substantial evidence standard of review. We do not reweigh the evidence. We view the evidence in the light most favorable to the judgment. The evidence must be reasonable, credible and of solid value. (In re Alexander (2007) 149 Cal.App.4th 605, 614.)
The personal reason exception is an exception to the general rule that damages are limited to the lesser of the cost to repair or diminution in value. (Heninger v. Dunn (1980) 101 Cal.App.3d 858, 863 (Heninger).) Homeowners who have a personal reason to repair are entitled to recover costs of repairs, even if the cost to repair exceeds the diminution in value. (Orndorff v. Christiana Community Builders (1990) 217 Cal.App.3d 683, 688 (Orndorff).) To establish the personal reason exception, all that is required is “some personal use by them and a bona fide desire to repair or restore.” (Ibid.)
It is undisputed that the Tluchaks personally used the home—they had been living in it for over three years at the time this matter went to trial. The issue then becomes the trial court’s finding that the Tluchaks had no bona fide desire to repair or restore their home.
The Tluchaks testified that they specifically selected the neighborhood, the particular lot and street, the house plan, particular details and amenities for the home, and their neighbors were close friends. Some had moved into the neighborhood to be in close proximity to the Tluchaks. Initially, the Tluchaks attempted to purchase just the unimproved lot; Hill would not sell it. Hill would sell the property only if he and Gold Crest could build the home on the lot. The Tluchaks wanted to remain in the home and repair it after all the careful work in selecting the neighborhood and lot. Additionally, they wanted to remain near their friends and did not want to uproot their three children from their schools.
The trial court found that “there is not a high probability” that the Tluchaks would use any damage recovery to repair their home. The trial court based this statement on (1) the Tluchaks had chosen to pursue litigation and hire consultants “shortly” after they moved into the home; (2) they had not made any significant repairs to the home by the time of trial; (3) they had “lived in and enjoyed the house continuously since moving in”; (4) they had refused to allow Gold Crest and its subcontractors to make repairs; (5) they had disagreed with some of the consultants and the appraiser they hired; and (6) the trial court found the Tluchaks’ claims of damage and evidence of the cost to repair to be “grossly exaggerated.”
Looking at each of the factual findings articulated by the trial court, we conclude the evidence was insufficient to support the trial court’s conclusion that the personal reason exception did not apply. The findings rely on either inappropriate considerations or facts that have no evidentiary support.
It is inappropriate to penalize the Tluchaks for availing themselves of the right to pursue litigation. Furthermore, the finding itself was not supported by the evidence in that the record evidence established that the Tluchaks spent one year in the home prior to filing suit and seeking out consultants and appraisers. Escrow closed December 10, 2004; suit was filed December 22, 2005. The one-year delay is not a filing “shortly” after moving in. The Tluchaks hardly could be expected to wait until the statute of limitations expired.
The finding that the Tluchaks had lived in the home for several years before trial, and using this as a basis for denying the personal reason exception, also is inappropriate. Case law holds that living in and enjoying the property is a prerequisite to invoking the personal reason exception. The homeowners must show some personal use. (Orndorff, supra, 217 Cal.App.3d at p. 688.) Had the Tluchaks not lived in and used the home, there would be no personal use and the personal reason exception could not apply.
In addition, the Tluchaks were not required to make any repairs prior to pursuing damages and invoking the personal reason exception. All that is required is an intention to make repairs or restore the property. Evidence of the requisite intent can be established by the homeowners’ testimony to that effect. (Orndorff, supra, 217 Cal.App.3d at p. 687; Heninger, supra, 101 Cal.App.3d at p. 863.)
The finding that the Tluchaks refused to permit Gold Crest or subcontractors chosen by Gold Crest to complete the repairs is not a valid basis for denying the personal reason exception. The builder is required to complete any repairs expeditiously and generally within 120 days under Civil Code section 921, subdivision (b). The Tluchaks waited one year before filing suit for damages, long after the statutory time to repair had expired. Furthermore, a homeowner is not required to engage in continued discussion with a contractor over how repairs are to be performed and is not required to allow the contractor to select who shall perform the repairs. Additionally, any offer to repair defects had to have been made by Gold Crest prior to close of escrow. (See Tellis v. Contractors’ State License Bd. (2000) 79 Cal.App.4th 153, 161-163.)
Whether the Tluchaks disagreed with consultants and appraisers they hired during the pursuit of litigation is wholly irrelevant to the issue of whether they fall within the personal reason exception. There is virtually nothing in case law that has been cited or that we have uncovered holding that a homeowner must agree with all consultants and appraisers they have hired in order to qualify for the personal reason exception.
Furthermore, the Tluchaks’ opinion of the cost to repair and restore their home is not relevant to whether or not they are eligible for the personal reason exception. The question of the amount of damages or cost of repairs to be awarded is separate and apart from the determination of whether the personal reason exception applies. In Heninger, the plaintiffs asserted the cost to restore the land would be $241,257, as opposed to the defendants’ estimate of $19,610. (Heninger, supra, 101 Cal.App.3d at p. 866.) Even though the appellate court found the plaintiffs’ estimate of the cost of repairs “manifestly unreasonable,” it concluded the personal reason exception clearly applied when the property owner testified, “‘I think the land is beautiful, the natural forest beautiful, and I would like to see it remain that way.’” (Ibid.)
When the Tluchaks challenged the statement of decision in the trial court, the trial court responded by stating that the findings did not mean what they stated. The trial court opined that it was not finding that the Tluchaks had to make repairs “out of their own pocket,” move out of the house, or own the property for some “indeterminate length” of time before the personal reason exception could apply. The trial court stated, “The factual findings set forth by this Court in the Proposed Statement of Decision are merely some of the various facts supporting this Court’s conclusion that the personal reason exception is not available to plaintiffs.”
The trial court’s response to the objections is not persuasive. The factual findings articulated by the trial court simply do not support its conclusion that the personal reason exception was unavailable to the Tluchaks.
III. Damages
We consider the damages award in light of our conclusion that the trial court used the wrong approach. The Tluchaks presented evidence of the cost of repair and Gold Crest presented evidence of the cost of fixing property damage. The trial court, in its discussion of damages and the award, used the terms interchangeably, thus leading to some confusion. In our analysis, the distinction is important. If the evidence presented by Gold Crest sufficiently meets the cost of repair standard, then no retrial on damages will be necessary. Using the substantial evidence standard, we conclude that the evidence was insufficient, and the damage award must be vacated.
The parties varied widely on the damages and defects and costs to repair the defects. The Tluchaks presented detailed testimony from Jundt and Lamb, fixing the cost of repair at $362,409. Lamb testified that he did not obtain written bids, but did speak with several contractors in estimating costs of repair. Gold Crest presented Ulman’s testimony. Ulman fixed the costs of necessary repairs at plus or minus $50,000 and stated his estimate was lower than Lamb’s because he, Ulman, used Bakersfield rates and efficiencies and apparently Lamb did not.
The Tluchaks wanted to present additional testimony from Jundt, Lamb, and/or themselves on the issue of cost of repairs using Bakersfield-area contractors. The trial court ultimately denied the request on the basis that this was not rebuttal evidence and, if it was proper rebuttal evidence, declined to allow the Tluchaks to testify because the evidence had to come from an “expert,” while at the same time refusing to allow either of the Tluchaks’ experts to testify on the basis that the experts could not “simply … parrot” another expert’s opinion. We need not discuss this issue as we are reversing the damage award.
The trial court ultimately awarded damages in an amount approximating that testified to by Ulman. Throughout his testimony, Ulman appeared to consider the cost to repair a defect so as to eliminate its effect on the value of the residence. He frequently minimized the damage and spoke in general terms. Although acknowledging the accuracy of the identification of the defects by Lamb and Jundt, he described how the defects could be minimized, not repaired. He presented no itemized analysis or calculation, and his analysis was more than a year old.
Also, the trial court erroneously applied Aas v. Superior Court (2000) 24 Cal.4th 627 to this situation and used an economic loss rule, requiring the Tluchaks to suffer actual property damage and diminution in value in order to recover. Aas, however, does not apply to residential construction. Building standards pertaining to residential construction were adopted and homeowners have a cause of action against a builder who violates those standards, regardless of whether the violation caused property damage. (Civ. Code, § 895 et seq.; Greystone Homes, Inc. v. Midtec, Inc. (2008) 168 Cal.App.4th 1194, 1202.) Both Jundt and Lamb testified in detail that these standards had been violated and that work performed did not meet minimum trade standards. This testimony was not contradicted by Ulman.
Additionally, Ulman’s testimony on the cost of repair was insufficient in other ways. Ulman did not obtain any formal bids from anyone in the Bakersfield area, or any other area, on the cost to repair the Tluchaks’ home. His testimony indicated that he did an informal survey of rates of various trades in the Bakersfield area and used that as a basis for calculating costs of repair, after eliminating numerous structural and other repairs deemed necessary by Jundt and Lamb. It is unclear whether Ulman’s informal survey was of licensed or unlicensed tradesmen and contractors. In any event, an expert’s “casual sampling of unknown sources” is not admissible evidence. (Korsak v. Atlas Hotels, Inc. (1992) 2 Cal.App.4th 1516, 1526.)
Furthermore, Ulman’s statement that efficiencies would occur appears to be based on speculation. There is no evidentiary support for the premise that contractors would simply paint and patch areas without charge. (People v. Richardson (2008) 43 Cal.4th 959, 1008.) Ulman specifically ignored numerous items that were not meeting building standards and excluded those items from his calculations, despite the Tluchaks’s entitlement to recover for those defectively installed items under Civil Code section 895 et seq. As indicated above, Ulman never contradicted Jundt’s or Lamb’s testimony that much of the work violated building standards and did not meet minimum trade standards. Ulman merely adopted the position that if it worked, even poorly, it did not need to be fixed.
Applying the personal reason exception and Civil Code section 895 et seq., the Tluchaks legally are entitled to the cost of repairs and restoring the property to bring it up to building codes and acceptable trade standards, not the lesser standard testified to by Ulman. Therefore, we will vacate the trial court’s award of damages and remand the case.
Although we are vacating the award of damages and remanding for further proceedings, we need not discuss the issue of the trial court’s bias against the Tluchaks. Should the Tluchaks choose to do so, they have the right to file a motion pursuant to Code of Civil Procedure section 170.6, subdivision (a)(2) to disqualify the judge previously assigned to their case.
DISPOSITION
The judgment is vacated and the matter remanded for further proceedings. The Tluchaks’ request for judicial notice filed March 10, 2009, is denied. Costs are awarded to the Tluchaks.
WE CONCUR: GOMES, J., DAWSON, J.