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California Appellate Court Clarifies “Reasonable Release” Under Section 1542 Waiver – Glass & Goldberg | Financing, Property & Bankruptcy Law
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California Appellate Court Clarifies “Reasonable Release” Under Section 1542 Waiver

California Appellate Court Clarifies “Reasonable Release” Under Section 1542 WaiverA California appeals court has ruled that a homebuyer who accepted a cash payment from a homebuilder in exchange for a written general release and Civil Code section 1542 waiver has released and waived all future construction defect claims.

In Belasco v. Wells, David Belasco purchased a new home from builder Gary Wells in 2004. Two years later, Belasco filed a construction defect claim against Wells with the Contractors State License Board. Belasco and Wells settled the dispute, with Wells paying Belasco $25,000 in lieu of repairs. Belasco signed a release and Civil Code §1542 waiver of all known and unknown claims.

The settlement agreement included a provision that stated the released claims included all causes of action on known and unknown design defects, construction defects, product defects and property damage. The Civil Code §1542 waiver included language that Belasco waived all rights pertaining to unknown claims.

In 2012, Belasco filed another suit against Wells and his surety, American Contractors Indemnity Company, for a roof defect discovered in 2011. Defendants moved for summary judgment, which the trial court granted, finding that the suit was barred by the terms of the 2006 settlement.

Belasco appealed the trial court’s ruling, arguing that the section 1542 waiver was not a “reasonable release” for unknown construction defects pursuant to section 929, that a “reasonable release” can only apply to specific violations, and that the 2006 settlement was invalid because it did not state a specific violation.

In its February 17, 2015, ruling, the California Court of Appeal, Second District found that the trial court properly granted summary judgment to the defendants based on the 2006 settlement. The court also found that the cash settlement with a release and a section 1542 waiver constituted a “reasonable release” under section 929. Since Belasco was represented by counsel and is an attorney himself, the court found his release and the section 1542 waiver were enforceable.

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