MONTEREY CLUB MANAGEMENT ASSOCIATION v. MORGAN (1991)

Monterey Club Management Association, a condominium association, and eight of its member-owners (collectively the Association) appeal after summary judgment was granted in favor of The Bank of California (the Bank) and August Building Company (August).   The trial court ruled the actions for fraud and construction defects were barred by the statute of limitations.   We conclude the doctrine of res judicata acts as a bar to these actions and affirm for this reason.

I

FACTUAL AND PROCEDURAL BACKGROUND

The Association, the Bank, and August were parties to a prior action in 1980 involving the condominium project which is the subject of the underlying suit.   The primary issue addressed is whether the dismissal of this prior action acts as a bar to the instant suit under the doctrine of res judicata.   We also address the issue of whether the fraud claims against the Bank are barred by the statute of limitations.

A. Initial Construction and Discovery of Defects

In 1973, Steven Abbey began construction of the nine-unit condominium project with the Bank providing the financing.   After the project was partially completed, Abbey filed for bankruptcy and in January 1976, the Bank obtained title through foreclosure proceedings.   Thereafter, the Bank retained August to complete construction.

The project is located on the side of a hill and a retaining wall provides the rear support.   In February 1976 the project was inspected by Dennis Cunningham (Cunningham), a Bank employee, and Bernard Martin, an August employee.   They noted water marks on the walls of one of the units and subsequent investigation revealed the retaining wall had not been waterproofed.   August advised the Bank that to repair the water leaks the retaining wall needed to be dug out and a waterproof membrane applied.   The estimated cost for this repair was approximately $50,000.   The Bank was concerned about the cost and asked for other alternatives.   August advised the Bank there was an epoxy paint which could be utilized to prevent moisture from seeping through the wall.   The Bank was told this might work, but August “wasn't sure about it.”   The Bank elected to utilize the epoxy paint.

In June 1976, the Bank sold the project to Kent Morgan (Morgan).   Morgan was not advised of the water leakage problem or the Bank's election to apply epoxy paint rather than a waterproof membrane.   After obtaining ownership, Morgan performed some finish work and sold the units to the present owners or their predecessors in interest.

In November 1977, Barbara Schorr (Schorr), a unit owner, informed Daniel Salerno, the project's architect, water was leaking through her interior wall which abutted the retaining wall.   This problem was brought to the attention of the Association who began to explore possible solutions.   On November 30, Salerno attended a meeting of the Association to discuss the leakage problem.   He stated it was nearly impossible to waterproof a wall from the inside.   He told them that while there was a new product that might solve the problem the only other solution was to dig the wall out and waterproof it with a membrane.

The Association obtained the services of William Travis, a structural consultant, and by letter dated January 27, 1978, he stated, “There was no visible evidence of a proper membrane on the concrete wall.”   He suggested the Association “consider excavation behind the wall to determine exactly what the waterproofing and drain tile situation is.”

On January 31, the Association sent a letter to Salerno indicating it wished to employ his services.   In his reply, Salerno pointed out, “What we did discover was there was no waterproof membrane, but instead there was a tar-like material mopped or brushed onto the face of the concrete block.   This type of waterproofing is what we refer to as damp-proofing and not a waterproof membrane.”   Salerno had also discovered a waterproof membrane had been specified in the plans for the project.

B. Schorr's Suit

In late 1978, Schorr became impatient with the Association's failure to act and filed a complaint for breach of contract and warranty, fraud, and infliction of emotional distress against Morgan, Morgan's real estate brokers and the Association.   She later added the Bank as a defendant.   She alleged “the roof and walls of the [r]eal [p]roperty leaked extensively, causing ․ substantial damage․”   She further alleged the condominium had not been constructed in a “waterproof manner.”   In addition, she alleged the real estate brokers knew of the severity of the leakage problem and the inadequacy of the former repairs, but deliberately withheld that information from her.

On March 19, the Association conducted a special meeting regarding the Schorr suit.   As a result of that meeting the following resolution was passed:

“RESOLVED:  To retain Mr. Sam Butler as the Association['s] legal counsel for the pending litigation, representing the collective interest of all members having water damage to their units and garages;  and, to authorize him to file cross complaints for relief and fraud, as necessary, against all former owners and real estate agents who failed to provide full disclosure concerning the water damage.”

On April 11, 1980, the Association filed an amended cross-complaint against various individuals and entities, including the Bank.   The amended cross-complaint alleged the Bank was the owner of the property and conveyed it to Morgan in 1977.   It also alleged that after obtaining the property through foreclosure, the Bank retained August to complete the construction.   The first cause of action stated, “[C]ross-[d]efendants, ․ and each of them, ․ acted negligently in the architectural design, engineering, construction, and development of the residential units known as The Abbey and in all aspects thereof, including, but not limited to, grading, compacting, waterproofing of walls, soil testing, installation of drainage systems, foundations, plumbing, electrical, roofs, etc.”

The sixth cause of action for fraud did not name the Bank as a cross-defendant but alleged Morgan and the real estate brokers knew of the water leakage problem and failed to disclose it.   It also alleged former owners intentionally failed to disclose the water leakage problem.

Prior to June 30, 1980, the depositions of Morgan, Bernard Toomey (Toomey), Morgan's broker, and Cunningham, the Bank's employee who had inspected the property, were taken.   The Association was represented at these depositions by counsel.   Morgan testified he had never been advised of the water leakage problem.   Further, he testified he was never advised the Bank had contemplated the use of green board or epoxy paint on the leaking walls.   Toomey testified the Bank never advised him of the water leakage problem, but he determined there was some kind of a problem because he had observed water spots on the wall of one of the units.   He concluded these spots had been on the wall when Morgan purchased the project.

Cunningham testified he had found evidence of water leakage in two of the units.   In one unit he found water stains on the wall and near the fireplace.   In the other unit he found “heavy water leakage through the wall” which he concluded was a structural problem.   He formed the impression the stains were caused by water from an outside source.   Attached to Cunningham's deposition was a letter from August to the Bank which indicated two coats of epoxy paint would be applied to the retaining wall and “green board” would be applied to the walls in the units where the wall was leaking.

Schorr settled her claim and her action was dismissed with prejudice.   This left only the cross-complaint to be litigated.   Mr. Aiken, the attorney for the Association, was caught short by the settlement.   He had contacted Schorr's attorneys to discuss sharing expert witnesses, but no agreement had been reached.   Schorr's attorney stated that “Mr. Aiken has expressed an admission to me he's simply going to coattail on our case․”

The case was called for trial on November 12, 1981.   The Association made a motion for continuance in the presiding department which was denied and the case was sent out to a trial department.   The motion for continuance was renewed and denied once again.   Thereafter, the Association indicated it wished to pick up the demand for jury and challenges were discussed.   The Association estimated the case would last three to four weeks and the proceedings were recessed until November 16.

When the case was called on the 16th, the Association's attorney once again renewed his request for continuance and stated, “over the weekend I have been trying to put together a case, trying to put together expert witnesses, and I have not been able to reach any financial arrangements with the necessary witnesses․”   The motion was again denied.   Mr. Aiken indicated he could not proceed without experts.   The court inquired if Mr. Aiken was dismissing and the following conversation took place:

“THE COURT:  You are telling me, in other words, that you are dismissing?

MR. AIKEN:  I am not dismissing, your Honor.   I am asking for a continuance and indicating to the Court that in fact we cannot proceed and prepare—show our case to the jury or the judge at this time because of the aforementioned facts.

THE COURT:  Well, that would lead me, I suppose, to the appropriate either Rules of Court or sections of the Code of Civil Procedure which bring into the cognizance of the Court the dismissal for failure to prosecute.”

The defendants requested a dismissal and a brief recess was taken to determine the appropriate section.   Subsequently, the case was dismissed pursuant to Code of Civil Procedure 1 sections 581, subdivision (3), and 581, subdivision (4).

The Association appealed the judgment of dismissal and the denial of a subsequent motion to vacate the judgment.   Both appeals were dismissed.   The appeal from the judgment was untimely and the appeal from the motion to vacate was dismissed on the ground the Association had failed to submit fees for preparation of the record.

C. Subsequent Litigation

On June 30, 1983, the two consolidated actions giving rise to this appeal were filed.   The first action was brought by eight individual condominium owners.   The second action was brought by the Monterey Club Management Association.   These actions in their amended state seek damages for negligence, strict liability, nuisance and fraud.   They allege the project has defective walls and roofs resulting in damage from water leakage, the defendants failed to ensure the project was constructed in accordance with plans and specifications, and the units were not constructed to withstand reasonably foreseeable environmental forces.   The complaints also allege the Bank acted fraudulently in failing to disclose the water leakage problem.

The court granted the summary judgment motions filed by the Bank and August and found the complaints were barred by the three-year statute of limitations in section 338, subdivision (b) and subdivision (d) for injury to real property and for fraud.

II

DISCUSSION Standard of Review

The granting of a motion for summary judgment is appropriate when the papers submitted establish there is not a triable issue as to any material fact and the moving party is entitled to a judgment as a matter of law.  (§ 437c, subd. (c).)  The function of the trial court is to determine whether such issues of fact exist.  (Molko v. Holy Spirit Assn. (1988) 46 Cal.3d 1092, 1107, 252 Cal.Rptr. 122, 762 P.2d 46;  Chern v. Bank of America (1976) 15 Cal.3d 866, 873, 127 Cal.Rptr. 110, 544 P.2d 1310.)

 The supporting and opposing papers are reviewed independently on appeal by applying a three step analysis.   First, the issues as framed by the pleadings must be identified.   Second, the moving papers must be examined to determine whether facts sufficient to negate the opposing claims and warrant judgment have been established, and third, the opposing papers are reviewed to determine if a triable material fact exists.  (Magnolia Square Homeowners Assn. v. Safeco Ins. Co. (1990) 221 Cal.App.3d 1049, 1058, 271 Cal.Rptr. 1;  AARTS Productions, Inc. v. Crocker National Bank (1986) 179 Cal.App.3d 1061, 1064, 225 Cal.Rptr. 203.)   A defendant is entitled to summary judgment if the papers establish that none of the plaintiff's causes of action can prevail.   (Molko v. Holy Spirit Assn., supra, 46 Cal.3d at p. 1107, 252 Cal.Rptr. 122, 762 P.2d 46;  Stationers Corp. v. Dun & Bradstreet, Inc. (1965) 62 Cal.2d 412, 417, 42 Cal.Rptr. 449, 398 P.2d 785.)

 Res Judicata

 The court found that all of the causes of action were barred by the statute of limitations.   While the Bank and August contended the dismissal with prejudice in the Schorr action also acted as a bar under the doctrine of res judicata, the court did not reach this issue.   The Association contends that even though the water leakage problems related to the retaining wall are barred by the statute of limitations, new defects discovered after June 30, 1980, are not barred.   These include (1) defective roof, (2) deteriorating walkways and decking, (3) defective concrete in the balconies, (4) prematurely worn exterior fixtures, (5) inadequate storm drains, (6) defective HVAC units, and (7) stucco damage from inadequate caulking of exterior wood.   The leaking retaining wall and the defective roof were mentioned in the original Schorr complaint filed prior to June 30, 1980.   The problems related to the roof and the retaining wall are barred by the three-year statute of limitations.   We need not reach the issue of whether the remaining defects are barred by the statute of limitations since all of the claims are barred under the doctrine of res judicata.

The cross-complaint in the Schorr action was dismissed after the Association's attorney indicated that he was unable to proceed without expert testimony.   The court stated it would dismiss for failure to prosecute and took a recess to determine the appropriate statutory sections.   Thereafter, it granted the defendants' motion pursuant to section 581, subdivision (3) and subdivision (4).²  Section 581, subdivision (3) is not applicable since the cross-complainant appeared for trial.

The Association contends that section 581, subdivision (4) is not applicable since the case was never voluntarily abandoned.   This case is similar to Larsson v. Cedars of Lebanon Hospital (1950) 97 Cal.App.2d 704, 707–708, 218 P.2d 604 where plaintiff's malpractice action was barred by the statute of limitations.   At trial plaintiff refused to offer evidence of her incompetency to overcome the statute.   In affirming the dismissal, the court noted:

“Section 581c ․ provides for the granting of a nonsuit upon the opening statement of plaintiff and that unless the court orders otherwise the judgment operates as an adjudication on the merits.  [Citations.]   The proceedings in the present case amounted to a good deal more than an opening statement by plaintiff.   Although, in a technical sense, it did not amount to an abandonment of the case [ (§ 581, subd. (4)) ], her persistent refusal to proceed as the court advised ․ rendered it impossible for her to receive a favorable decision on the issue.   The result is that in a practical sense plaintiff did abandon her case.”  (Larsson v. Cedars of Lebanon Hospital, supra, 97 Cal.App.2d at pp. 707–708, 218 P.2d 604.)

Here, while the Association did not file a voluntary dismissal or state it was abandoning the case, it refused to go forward.   The result is the equivalent of an abandonment.

An analogous situation occurred in Miller v. Marina Mercy Hospital (1984) 157 Cal.App.3d 765, 204 Cal.Rptr. 62 where the court dismissed with prejudice after the plaintiff had failed to respond to a request for admissions and attempted to voluntarily dismiss before a summary judgment motion was heard.   The court concluded that by failing to respond the requests were deemed admitted and plaintiff could not prevail.   Here, the statements by the Association's attorney that he did not have any expert witnesses was an admission that he was unable to prove his case.   The refusal to produce evidence constitutes an admission that an action lacks merit.  (Kahn v. Kahn (1977) 68 Cal.App.3d 372, 382, 137 Cal.Rptr. 332;  Unger v. Los Angeles Transit Lines (1960) 180 Cal.App.2d 172, 187, 4 Cal.Rptr. 370.)   It would have been fruitless to proceed further.

 Even if the court could not find a statute which clearly fit the circumstances, its power to dismiss was not totally limited by the statutory provisions.   The court has the inherent power to dismiss actions for failure to prosecute diligently.  (Lyons v. Wickhorst (1986) 42 Cal.3d 911, 915, 231 Cal.Rptr. 738, 727 P.2d 1019;  Steen v. City of Los Angeles (1948) 31 Cal.2d 542, 546, 190 P.2d 937;  Feingersh v. Lutheran Hosp. Society (1977) 66 Cal.App.3d 406, 411, 136 Cal.Rptr. 155.)

Further, the Association failed to pursue its appeal of the court's dismissal with prejudice and the validity of the dismissal with prejudice was not subject to attack at the summary judgment hearing.  (Roybal v. University Ford (1989) 207 Cal.App.3d 1080, 1085, 255 Cal.Rptr. 469.)

The Association contends there can never be an implied abandonment under section 581, subdivision (4) and cites Kaufman & Broad Bldg. Co. v. City & Suburban Mortg. Co. (1970) 10 Cal.App.3d 206, 213, 88 Cal.Rptr. 858 for this proposition.   In Kaufman & Broad the court found section 581, subdivision (4) had been improperly applied to dismiss a cause of action when the statements made by the plaintiff regarding his intentions to proceed were at best ambiguous.   In chambers, plaintiff had indicated to the court he “might” wish to abandon this cause of action at a future time, but “he qualified his statements repeatedly by reservations and equivocation.”   (Ibid.)  During the trial considerable evidence was introduced on this cause of action.   In reviewing the proceedings below, the opinion notes “Upon motion for a new trial the court as well as counsel found themselves unable to clearly remember what was said in the court's chambers and more importantly they forgot exactly what was decided there.”  (Id. at p. 214, 88 Cal.Rptr. 858.)   The court found that the record did not clearly indicate the plaintiff had made an election not to proceed and reversal was required since “Such intent must be demonstrated to the court by way of a motion to dismiss, stipulation of the parties or some other form of express intent on the record.”  (Id. at p. 213, 88 Cal.Rptr. 858;  italics added.)

Kaufman & Broad, supra, 10 Cal.App.3d 206, 88 Cal.Rptr. 858, is distinguishable.   First, the attack on the dismissal was a direct appeal from a judgment entered pursuant to a directed verdict, not a collateral attack.   Second, here the Association's attorney indicated he was not prepared and could not proceed.   His statements were not ambiguous and are clearly reflected in the record.   While he claimed he was not abandoning his case, the court correctly concluded, despite his protestations, that his statements constituted an abandonment.

The opinion in Kaufman & Broad, supra, 10 Cal.App.3d 206, 88 Cal.Rptr. 858 relies in part on Burnett v. Burnett (1948) 88 Cal.App.2d 805, 806–807, 199 P.2d 685, where an abandonment pursuant to section 581, subdivision (4) was found after plaintiff had attempted to dismiss without prejudice after trial had commenced.   In Burnett, the court stated at page 807, “Such a motion having been made while respondent was insisting upon proceeding with the trial was sufficient evidence to warrant the implied finding of abandonment.”  (Italics added.)   Here, as in Burnett, the actions taken by the Association were sufficient to constitute an implied abandonment and justify a dismissal with prejudice.

 A dismissal with prejudice is equivalent to a judgment on the merits.  (Roybal v. University Ford, supra, 207 Cal.App.3d at p. 1086, 255 Cal.Rptr. 469;  Campbell v. Security Pac. Nat. Bank (1976) 62 Cal.App.3d 379, 386, 133 Cal.Rptr. 77.)   Whatever claims the Association asserted in the cross-complaint are barred by the dismissal.

 In analyzing the application of the doctrine of res judicata, the key issue is whether the same cause of action is involved in both suits.   California utilizes the “primary rights” theory in focusing on this issue.   The invasion of one primary right gives rise to a single cause of action.   (Slater v. Blackwood (1975) 15 Cal.3d 791, 795, 126 Cal.Rptr. 225, 543 P.2d 593;  Eichman v. Fotomat Corp. (1983) 147 Cal.App.3d 1170, 1174, 197 Cal.Rptr. 612.)   If the same primary right is involved in both actions, judgment on the first bars not only consideration of the matters raised, but also bars consideration of the matters which could have been raised.   (Sutphin v. Speik (1940) 15 Cal.2d 195, 202–203, 99 P.2d 652;  Eichman v. Fotomat Corp., supra, 147 Cal.App.3d at p. 1175, 197 Cal.Rptr. 612.) ³

The Association had two primary rights or causes of action.   First, it had a right to purchase the property free from defects.   Second, it had a right to have the known defects disclosed to allow it to determine whether it wished to proceed with the purchase.   These rights formed the basis for the cross-complaint.   The cross-complaint alleged that the cross-defendants were negligent in the architectural design, engineering, construction, and development and in all aspects thereof including, but not limited to, grading, compacting, waterproofing of walls, soil testing, installation of drainage systems, foundations, plumbing, electrical, roofs, etc.   It also alleged that the former owners knew of the defects and failed to disclose them.   These same primary rights form the basis for the current complaints and all causes of action contained therein are barred.

 The Association relies upon Winston Square Homeowner's Assn. v. Centex West, Inc. (1989) 213 Cal.App.3d 282, 261 Cal.Rptr. 605 and Chu v. Canadian Indemnity Co. (1990) 224 Cal.App.3d 86, 274 Cal.Rptr. 20 for the proposition that subsequently discovered defects give rise to additional and separate causes of action.   Its reliance is misplaced.   Both of these cases dealt with the application of the statute of limitations and were concerned with when the construction defects were discovered or should have been discovered.   The policies giving rise to statutes of limitations differ from those underlying the doctrine of res judicata.   Statutes of limitations seek to insure that a party will act timely in discovering and pursuing its legal remedies.   They prevent the assertion of stale claims.  (Addison v. State of California (1978) 21 Cal.3d 313, 317, 146 Cal.Rptr. 224, 578 P.2d 941.)   The doctrine of res judicata seeks to curtail multiple litigation and to insure that a party investigates its case and alleges all of its damages in a single proceeding to prevent indefinite exposure to risk and needless expense.

 There are two consolidated actions giving rise to this appeal and the individual owners are the plaintiffs in one of these actions.   The question arises as to whether they are bound by the judgment in the prior action where the Association was the only named cross-complainant.

 A controlling person, although not a party, will be bound by a judgment arising out of a suit in which the person has a financial interest.   (Stafford v. Russell (1953) 117 Cal.App.2d 319, 320, 255 P.2d 872.)   This doctrine is codified in section 1908, subdivision (b) which provides in part:

“A person who is not a party but who controls an action, individually or in cooperation with others, is bound by the adjudications of litigated matters as if he were a party if he has a proprietary or financial interest in the judgment or in the determination of a question of fact or of a question of law with reference to the same subject matter or transaction;  if the other party has notice of his participation, the other party is equally bound․”

 Further, where statutory authority to sue is given to an entity or association, a judgment against the entity or association is res judicata as to all members of the association or the entity.  (Rynsburger v. Dairymen's Fertilizer Co-op., Inc. (1968) 266 Cal.App.2d 269, 277, 72 Cal.Rptr. 102.)   At the time the cross-complaint was filed, section 374 provided:

“An owners' association established in a project consisting of condominiums, as defined in Section 783 of the Civil Code, ․ shall have standing to sue as the real party in interest for any damages to commonly owned lots, parcels, or areas or individually owned lots, parcels, or areas which the owners' association is obligated to maintain, preserve, or repair occasioned by the acts or omissions of others, without joining with it the individual owners of such project or development.”

 Nor is an association limited to the statutory provisions allowing it to sue on behalf of its members.   In Salton City etc. Owners Assn. v. M. Penn Phillips Co. (1977) 75 Cal.App.3d 184, 141 Cal.Rptr. 895, a property owners' association was allowed to bring suit as a representative of its members for damages arising from a land sale fraud operation where the misrepresentations had been made to each member of the association.

In this case, the cross-complaint was brought on behalf of the Association and “on behalf of the individual owners and members.”   The cross-complaint sought damages for each unit resulting from the construction defects and also contained a fraud cause of action based upon misrepresentations made by former owners regarding individual units.

The owner-members met to review the initial suit and later agreed to hire an attorney to file the cross-complaint.   Thereafter, the members were kept advised of the status of the suit at their monthly meetings.   On November 14, 1981, two days before the case was dismissed and after it had been assigned to a trial department, a special meeting was called to discuss the litigation.   It was contemplated that the cross-complaint would be dismissed and the legal fee assessment was increased to cover the costs of an appeal.⁴

The cross-complaint was brought on behalf of the individual members who are now the plaintiffs.   These members controlled the prior action and had a proprietary and financial interest in the outcome.   The doctrine of res judicata is applicable and the individual plaintiffs are bound by the dismissal with prejudice in the prior proceeding.

 Statute of Limitations Regarding Fraud

 Our conclusion that res judicata bars this action is a sufficient ground for affirmance of the court's decision.   We also conclude, however, the fraud claim against the Bank is barred by the statute of limitations.   The Association contends the court erred by concluding the fraud claims were barred by the three-year statute of limitations found in section 338, subdivision (d).   The limitation period begins to run when the aggrieved party could have discovered the fraud through the exercise of reasonable diligence.  (Sun 'n Sand, Inc. v. United California Bank (1978) 21 Cal.3d 671, 701, 148 Cal.Rptr. 329, 582 P.2d 920;  Hobart v. Hobart Estate Co. (1945) 26 Cal.2d 412, 437, 159 P.2d 958.)   When the facts known are susceptible of opposing inferences, the question of whether a prudent person would have notice is generally a question of fact.   However, where the knowledge is such as to compel the conclusion that a prudent person would have suspected the fraud, the court may determine as a matter of law, that there has been discovery.  (National Automobile & Cas. Ins. Co. v. Payne (1968) 261 Cal.App.2d 403, 409, 67 Cal.Rptr. 784.)

 Since the complaints giving rise to this appeal were filed on June 30, 1983, the question is whether a prudent person with the knowledge possessed by the Association on June 30, 1980, would have suspected the fraud.   We conclude the known facts were sufficient to put the Association on notice of the fraud.

The Association alleges that it did not discover the fraud until January 7, 1981, when the depositions of the owners of August were taken.   The owners testified the Bank had been advised the wall needed a waterproof membrane to correct the leakage problem, but had rejected that solution and decided to paint the wall with an epoxy paint.   The Association confuses discovery of a cause of action with the discovery of evidence to prove it.  (See McCloskey v. Carlton Builders (1985) 165 Cal.App.3d 689, 693, 211 Cal.Rptr. 659;  Dillashaw v. Ayerst Laboratories, Inc. (1983) 141 Cal.App.3d 35, 40, 190 Cal.Rptr. 68.)

Prior to June 30, 1980, the Association was aware of the water leakage problem.   Salerno, the project architect, and Travis, a structural consultant, had advised the Association that the wall did not have a waterproof membrane, but some “tar-like substance” had been brushed on.   Salerno had also discovered that the waterproof membrane had been specified in the original plans.   The Association had passed a resolution authorizing its attorney to file actions for fraud and the cross-complaint indicated the Bank had obtained the property through foreclosure and had hired August to complete the project.   From the depositions taken in the Schorr action, the Association knew the Bank had sold the property to Morgan and had failed to advise him of the water leakage problem or the repairs made.   The deposition of Cunningham, a Bank employee, established the Bank knew of the water leakage problem prior to the sale and the documentation attached to the Cunningham deposition indicated the Bank had utilized an epoxy paint on the wall and “green board” in the units where the wall was leaking.   The facts were sufficient, as a matter of law, to create a suspicion that the Bank knew of the problem and concealed it.

 Nor does the doctrine of equitable tolling extend the statute of limitations.  “Equitable tolling” is designed to “soften the harsh impact of technical rules which might otherwise prevent a good faith litigant from having a day in court.”  (Addison v. State of California, supra, 21 Cal.3d at p. 316, 146 Cal.Rptr. 224, 578 P.2d 941.)   It is not applicable unless the party seeking relief has acted reasonably and in good faith.  (Wood v. Elling Corp. (1977) 20 Cal.3d 353, 361–362, 142 Cal.Rptr. 696, 572 P.2d 755;  Addison v. State of California, supra, 21 Cal.3d at p. 319, 146 Cal.Rptr. 224, 578 P.2d 941.)   When a party fails to obtain a trial because of his own neglect or lack of diligence, the doctrine will not apply.   (Stuckman v. Woodhull (1959) 170 Cal.App.2d 424, 427, 338 P.2d 934.)

The Association was not prepared to proceed to trial on the cross-complaint because it had failed to secure the necessary expert witnesses.   Further, it waited for over a year and a half after the dismissal of the cross-complaint to file the second action.   The Association did not act diligently and the doctrine is not applicable.

III

DISPOSITION

The judgment is affirmed.

FOOTNOTES

FOOTNOTE.  

FN1. All statutory references are to the Code of Civil Procedure unless otherwise specified..  FN1. All statutory references are to the Code of Civil Procedure unless otherwise specified.

2.   At the time the cross-complaint was dismissed, section 581 read in pertinent part:  “An action may be dismissed in the following cases:  [¶] 3․   By the court, when either party fails to appear on the trial and the other party appears and asks for the dismissal, or when a demurrer is sustained without leave to amend, or when, after a demurrer to the complaint has been sustained with leave to amend, the plaintiff fails to amend it within the time allowed by the court, and either party moves for such dismissal.  [¶] 4․   By the court, with prejudice to the cause, when upon the trial and before the final submission of the case, the plaintiff abandons it.”

3.   The cross-complaint was dismissed with prejudice on November 16, 1981.   The Association alleges that many of the defects were not discovered until after June 30, 1980.   The declaration of Dennis Aiken, the Association's attorney at the time of the dismissal and a plaintiff-owner, alleges the defects pertaining to the roof, drains, HVAC equipment, decking and caulking were not discovered until after July 1980.   The declaration of Joseph John, president of the Association, alleges these defects were not discovered until after September 1980.   It appears that many of these defects were known to the Association at the time of the dismissal.

4.   The November 14, 1981 minutes of the Association state, “A quorum being present, the president stated the first business to come before the meeting was the discussion of the lawsuit․   Dennis Aiken, who is monitoring the case for Monterey, gave a report on the standing of the lawsuit․   He also suggested that the [A]ssociation retain a law firm to make an appeal, should the law suit be dismissed.   Discussion of the above mentioned report followed.”

AMOS, Associate Justice, Assigned.* FN* Assigned by the Chairperson of the Judicial Council.

HUFFMAN, Acting P.J., and FROEHLICH, J., concur.