Colberg v. Rellinger, 1

• Decision Date: 14 July 1988
• Docket Number: No. 1,CA-CIV,1
• Citation: 770 P.2d 346,160 Ariz. 42
• Parties: Alfred A. COLBERG and Mildred K. Colberg, husband and wife, Plaintiffs-Appellants, v. Orlo RELLINGER and Judi Rellinger, husband and wife, Defendants-Appellees. 8857.
• Court: Arizona Court of Appeals

Page 346

770 P.2d 346

160 Ariz. 42

Alfred A. COLBERG and Mildred K. Colberg, husband and wife, Plaintiffs-Appellants, v. Orlo RELLINGER and Judi Rellinger, husband and wife, Defendants-Appellees.

No. 1 CA-CIV 8857.

Court of Appeals of Arizona Division 1, Department C.

July 14, 1988.

Supplemental Opinion Dec. 13, 1988.

Reconsideration Denied Jan. 27, 1989.

Review Denied April 4, 1989.

[160 Ariz. 43] Favour, Weaver, Moore & Schuyler by John B. Schuyler, Jr., Prescott, for plaintiffs-appellants.

Toci, Murphy & Beck by Thelton D. Beck, Prescott, for defendants-appellees.

OPINION

SHELLEY, Presiding Judge.

This is an action for damages for faulty construction of a residence. Alfred and Mildred Colberg (Colberg) filed a complaint alleging breach of contract against Rellinger Construction Co., Inc. (Company) and negligence and breach of implied warranty against Orlo and Judy Rellinger (Rellinger). The trial court awarded judgment for Colberg against the company in the sum of $17,390.18 but denied recovery against the individual defendants (Rellinger). The trial court ordered recovery of attorney's fees by Colberg against Company in the amount of $15,390 and by Rellinger against Colberg in the amount of $11,862.00 pursuant to A.R.S. § 12-341.01(A). Colberg filed this appeal. In this appeal, we conclude that a homeowner does not have a negligence claim against a contractor for structural defects in the home. We also conclude that a homeowner has no claim for negligent supervision against the contractor's qualifying party, under A.R.S. § 32-1127. Finally, we conclude that these two claims do not arise out of a contract within the meaning of A.R.S. § 12-341.01(A).

TRIAL COURT ACTION

Albert and Mildred Colberg contracted with the Company for the construction of their house. The contract provided that all work would be done in a workmanlike manner. The Company was licensed under Arizona contractors law. Orlo Rellinger was president of and qualifying party for the Company.

Colberg sued the Company and Rellinger seeking damages for structural defects in their house. He claimed both breach of contract and negligence. Colberg argued that Rellinger was personally liable on three bases:

(1) Rellinger personally guaranteed the construction of Colberg's house;

(2) Rellinger, as an officer in control of the Company, was personally liable for the Company's tortious activities; and

(3) Rellinger, as qualifying party for the Company, was liable for his inadequate supervision of the work performed by the Company, pursuant to A.R.S. § 32-1127.

The trial court awarded Colberg damages against the Company on the contract claim. However, it held that Rellinger was not liable on the negligence claims, finding that Rellinger did not personally guarantee the work and concluding that Colberg had no negligence claim for structural defects in their house. In its minute entry of September 23, 1985, the trial court found the following:

Plaintiffs [Colberg] seek recovery not only against the Defendant contracting company, which is a corporation, but also against Defendant Orlo Rellinger personally. Defendant construction company concedes it is liable for any recovery the Court allows. However, Defendant Orlo Rellinger asserts that he cannot be personally liable for any amounts adjudged due. Plaintiffs admit they are not attempting to pierce the corporate veil in order to impose liability on Orlo Rellinger personally but rely instead on a theory of independent negligence and a theory of breach of express warranty.

Addressing the latter theory first, Plaintiffs assert that Orlo Rellinger guaranteed to them that he would personally supervise the construction of the residence in order that it would be constructed in a workmanlike fashion and without defects. Defendant Rellinger denies that he ever made such a guarantee. The Court finds as a fact that such a guarantee was never made and, therefore, Plaintiffs' claim against Orlo Rellinger fails on this theory.

Turning now to the negligence theory, it is first important to note that the damages sought in this case are entirely restricted to remedying the structural defects in the house. There is no claim for money damages resulting from personal injuries or damage to property other than the structure itself caused by the defects in the structure. In reaching its conclusion herein, this Court has assumed, without deciding, that Orlo Rellinger was negligent in his supervision of the construction of the residence and that his negligence caused some of the defects for which recovery has been permitted.

Given the factual setting of this case and the claim which is made, it is apparent that Plaintiffs cannot recover in negligence. Woodward v. Chirco Const. Co., Inc., 141 Ariz. 514 (1984) and Nastri v. Wood Bros. Homes, Inc., 142 Ariz. 439 (1984) teach that an action in negligence is not available in this context when the damages claimed are limited to remedying structural defects. Plaintiff contends, however, that even though the Defendant construction company, which was the builder-vendor in this case, cannot be liable in negligence, that Mr. Rellinger should nonetheless be held guilty of negligence for violation of a statutory duty imposed on him by virtue of the contractor licensing statutes. A.R.S. Section 32-1127.

It is not cleare [sic] to this Court how the contractor's licensing statute can operate to create liability in negligence in this case. Assume for purposes of discussion no corporate Defendant existed herein and Orlo Rellinger personally was the builder-vendor in this case. Both Woodward and Nastri would preclude recovery based on negligence. That being so, it would be anomalous to impose liability based on negligence when there is a corporate person interposed as builder-vendor between Plaintiffs and Mr. Rellinger.

The Court recognizes the result reached in McFeeters v. Renollet , 500 P.2d 47 (Kan.1972). Although it is not precisely clear in the reported opinion in McFeeters, it does appear that the damages claimed were limited to remedying structural defects in the basements of the subject houses. The Kansas Supreme Court did permit the Plaintiffs in this case to recover damages both in contract and negligence from the Defendant corporation and personally from its president. While Woodward did cite McFeeters with approval, the actual holding in Woodward does not support adopting the McFeeters rule. Woodward clearly distinguished between an action to recover solely for remedying structural defects, which must be in contract, and an action for damage to other property or personal injury caused by the defects, which is an action in tort. Therefore, Plaintiffs reliance on McFeeters is misplaced.

ISSUES

Colberg presents the following three issues on appeal:

(1) Whether the trial court erred in concluding that Colberg had no negligence claim against Rellinger for structural defects in their house;

(2) Whether Rellinger was liable as qualifying party for inadequate supervision, under A.R.S. § 32-1127; and

(3) Whether Colberg's tort claims arose out of a contract under A.R.S. § 12-341.01(A).

LEGAL DISCUSSION

Preclusion

Rellinger argues that Colberg is precluded from appealing these three issues. In his motion to dismiss this appeal, Rellinger argued that Colberg, by collecting his judgment against the Company from the contractors' recovery fund, waived his right for any review of the judgment. See Rosen v. Rae, 132 Ariz. 509, 511, 647 P.2d 640, 642 (App.1982). In his motion, Rellinger also argued that Colberg did not raise the attorneys' fees issue in the trial court. In response to Rellinger's motion to dismiss, this court concluded that Colberg was not precluded from seeking appellate review and that the attorneys' fees issue was appropriately briefed. Rellinger requests that we reconsider our order. We decline to do so.

Tort Recovery

The trial court held that Colberg had no negligence claim for structural defects in their house. Division 2 of the Arizona Court of Appeals has addressed this issue:

We agree with the appellee [contractor] that the judgment dismissing the negligence count should be affirmed. The damage claimed in this case involves the structure itself. There is no claim for damage to personal property or personal injury. In Woodward v. Chirco, supra, our supreme court held that the purchaser of a home could sue in both contract and tort for injuries sustained due to the builder's failure to construct the house in a workmanlike manner. However, the court explained that the available action in contract was for "defects in the structure itself as such defects render the home less than the purchaser bargained for," whereas the available tort claim was for "damage to personal property or personal injury" caused by the defective construction.

A case directly in point is Crowder v. Vandendeale, 564 S.W.2d 879 (Mo.1978). In that opinion the court recognized an implied warranty of habitability in a new home. However, the court concluded that recovery for property damage caused by latent structural defects was not actionable in negligence. The court reasoned:

A duty to use ordinary care and skill is not imposed in the abstract. It results from a conclusion that an interest entitled to protection will be damaged if such care is not exercised. Traditionally, interests which have been deemed entitled to protection in negligence have been related to safety or freedom from physical harm. Thus, where personal injury is threatened, a duty in negligence has been readily found. Property interests also have generally been found to merit protection from physical harm. However, where mere deterioration or loss of bargain is claimed, the concern is with a failure to meet some standard of quality. This standard of quality must be defined by reference to that which the parties have agreed upon. 564 S.W.2d at 882. (emphasis in original).

And in Redarowicz v. Ohlendorf, supra, ...