Beware Contractor Who Speaks With Forked Tongue

If you rely on a licensed general contractor to get your building permits, and he doesn't bother, are you out of luck?

Beware. In California, you've got trouble. Ciraulo v. City of Newport Beach (2007) 2007 DJDAR 2172 (4th Dist., Div. 3, No. No. G034963).

Joseph and Carole Ciraulo owned a duplex, and decided to build a two-story single-family home. They got a permit, which included a 25-square-foot rooftop structure to house the top of an elevator shaft, even though the structure exceeded the usual height limit.

The Ciraulos decided they wanted to include a fireplace, a bathroom, and other improvements on the roof, which would require a 125-square-foot structure. They asked their contractor to build it, but only if he obtained a permit from the city. The contractor took the easy way out in a California beach city--he went ahead and built the enlarged structure without a revised permit.

After the fact, the Ciraulos applied for variances, which the City refused. After the obligatory appeal to the City Council, the Ciraulos went to court, seeking a writ of mandate. "Tough luck," said the Court of Appeal.

Justice Bedsworth, writing for a unanimous court, said:

While it is clear the Ciraulos view themselves as innocent victims in this case -- and indeed, for all we know, they are -- it would appear the one who victimized them was their contractor, not the City. Apparently, the Ciraulos delegated the responsibility for ensuring the rooftop expansion was properly approved to the contractor. He gave them the impression he would take care of it, and they relied upon him to do it. This entire mess was created not because the Ciraulos relied upon the City's inspections as indicating approval for the expansion, but because they relied upon their contractor to actually obtain that approval.

Significantly, no one contends the contractor was unaware the expansion was not properly approved, or that he was otherwise "mistaken" about what was going on. And, no one contends the contractor himself was misled by anything the City's inspectors did, or that he reasonably believed the various inspectors were authorized to, in effect grant a "permit" for structural changes which violated the city codes. Because the contractor was the Ciraulos' agent, his knowledge (and misconduct) is legally attributable to them. (Civ. Code, � 2338; Powell v. Goldsmith (1984) 152 Cal.App.3d 746, 750.) The fact the Ciraulos themselves were, in effect, victimized by his misconduct {Slip Opn. Page 14} is of no moment. "Appellants state they relied completely on 'the honesty and integrity' of [their agent]. Their reliance and trust was misplaced. A principal cannot benefit from the fraud of its agent who is acting in the course and scope of his agency." (Id. at p. 751, italics added.)

Although this result is harsh, and puts a burden on homeowners who may be quite unsophisticated, the court could hardly have ruled otherwise without inviting collusion between homeowners and contractors, seeking to obtain advantages that they wouldn't be allowed under the normal planning process.

Whether planning and zoning restrictions in California beach cities are oppressive and excessive is a separate question. If a city is going to have any restrictions, as has been permitted by the U.S. Supreme Court for nearly a century under the local "police power," then owners have to be responsible for the acts of their agents who break the rules.

The rule of Ciraulo puts a burden on homeowners who may be naïve and inexperienced. If you build or remodel a custom house in California, you had better pile up reserves of both cash and patience, and make sure your contractor has plenty of insurance. You may need all three.

Incidentally, if there was no collusion between the Ciraulos and the contractor, the next lawsuit is likely to be one by the Ciraulos against the contractor, for breach of contract and negligence, asking for the cost of the roof structure back, as well as the cost of demolition and legal fees.

The more complicated the rules get, the better lawyers do. Sometimes "preventive law" before the fact can be a lot cheaper than litigatin after the horses have left the barn. And who knows? The barn may be illegal, too.