Evans Withycombe, Inc. v. Western

• Decision Date: 11 May 2006
• Docket Number: No. 1 CA-CV 04-0196.,1 CA-CV 04-0196.
• Citation: 215 Ariz. 237,159 P.3d 547
• Parties: EVANS WITHYCOMBE, INC., an Arizona corporation n/k/a Evans Withycombe Management, Inc., an Arizona corporation, Third Party Plaintiff-Appellant, v. WESTERN INNOVATIONS, INC., an Arizona corporation; Construction Inspection & Testing Co., Inc., an Arizona corporation, Third Party Defendants-Appellees.
• Court: Arizona Court of Appeals

159 P.3d 547

215 Ariz. 237

EVANS WITHYCOMBE, INC., an Arizona corporation n/k/a Evans Withycombe Management, Inc., an Arizona corporation, Third Party Plaintiff-Appellant, v. WESTERN INNOVATIONS, INC., an Arizona corporation; Construction Inspection & Testing Co., Inc., an Arizona corporation, Third Party Defendants-Appellees.

No. 1 CA-CV 04-0196.

Court of Appeals of Arizona, Division 1, Department D.

May 11, 2006.

Amended by Order May 12, 2006.

Amended by Order November 13, 2006.

Doyle Berman Gallenstein, P.C. By William H. Doyle, Dennis A. Bell, Phoenix, and Springel & Fink, LLP By Leonard T. Fink, Scottsdale, Attorneys for Third Party Plaintiff-Appellant.

Schneider & Onofry, P.C. By Jonathan D. Schneider, Jason M. Kelly, Phoenix, Attorneys for Third Party Defendants-Appellees Western Innovations, Inc.

Tryon, Heller & Gaughan, P.C. By G. Michael Tryon, Phoenix, Attorneys for Third Party Defendants-Appellees Construction Inspection & Testing Co., Inc.

OPINION

SNOW, Judge.

¶ 1 A contractor, Evans Withycombe, Inc., appeals the dismissal of its third-party complaint against its subcontractors based on Arizona Revised Statutes ("A.R.S.") section 12-552 (2003), a statute of repose. Because § 12-552 bars Evans Withycombe's contract-based claims against its subcontractors, we affirm in part. Because it does not bar Evans Withycombe's common-law indemnity claims against its subcontractors, we reverse in part and remand for further proceedings.

FACTUAL AND PROCEDURAL HISTORY

¶ 2 Ira and Wilma Weiss purchased a home in the Meridian at McCormick Ranch. The general contractor on the Weisses' home was Evans Withycombe. Various subcontractors, including Western Innovations, Inc. ("Western"), a landscaping subcontractor, and Construction Inspection & Testing Co. ("CIT"), which conducted soil testing at the property, also worked on the Weisses' home pursuant to subcontracts with Evans Withycombe.

¶ 3 The City of Scottsdale issued a certificate of occupancy on the Weisses' home on January 10, 1992. More than eight years later, on August 8, 2000, the Weisses sued Evans Withycombe for defective construction. More than two years after that, and immediately before it settled the Weisses' claims against it in August 2002, Evans Withycombe filed a third-party complaint against subcontractors that had worked on the home. Evans Withycombe alleged that Western had "failed to adhere to the standards and specifications provided in" its subcontract with Evans Withycombe. It also alleged that CIT had prepared a soil analysis and report but had "failed to adequately perform [its duty] as a soils engineer." Based on these allegations Evans Withycombe asserted separate claims for breach of contract, breach of warranty, negligence, and indemnification against Western, CIT, and others.

¶ 4 Western filed a motion for summary judgment to dismiss Evans Withycombe's third-party complaint.¹ The motion was based on § 12-552, which barred any and all claims arising out of contract filed more than nine years after substantial completion of the Weisses' home. The trial court granted Western's motion and dismissed the third-party complaint in its entirety. Evans Withycombe timely filed a notice of appeal. We have jurisdiction pursuant to A.R.S. § 12-2101(B) (2003).

ANALYSIS

¶ 5 On appeal, Evans Withycombe contends the court erred in applying § 12-552 to bar claims among the construction and design professionals involved in the construction of an improvement. It further asserts that even if the statute of repose bars its contract-based claims, the trial court erred in dismissing its claims for negligence and indemnity because they are not "based in contract."

I. Section 12-552(A) Bars Evans Withycombe's Breach of Contract and Warranty Claims Against Its Subcontractors.

¶ 6 Statutory construction is a question of law subject to de novo review. Maycock v. Asilomar Dev., Inc., 207 Ariz. 495, 500, ¶ 24, 88 P.3d 565, 570 (App.2004). On appeal from a summary judgment, we independently determine whether the trial court properly applied the law. Gonzalez v. Satrustegui, 178 Ariz. 92, 97, 870 P.2d 1188, 1193 (App.1993).

¶ 7 When interpreting a statute, our goal is to determine and effectuate the legislature's intent, and thus we first consider the statutory language. Maycock, 207 Ariz. at 500, ¶ 24, 88 P.3d at 570. If it "is unambiguous, we give effect to the language [as written] and do not use other rules of statutory construction in its interpretation." Id.

¶ 8 The statute states:

A. Notwithstanding any other statute, no action or arbitration based in contract may be instituted or maintained against a person who develops or develops and sells real property, or performs or furnishes the design, specifications, surveying, planning, supervision, testing, construction or observation of construction of an improvement to real property more than eight years after substantial completion² of the improvement to real property.

A.R.S. § 12-552(A). If an injury or latent defect is discovered during the eighth year, the statute extends the period for suit but sets a limit of "no . . . more than nine years after the substantial completion of the improvement." A.R.S. § 12-552(B).³ Section 12-552(C) further clarifies that subsection (A) applies to "any action based on implied warranty arising out of the contract or the construction."

¶ 9 We have recognized that § 12-552(A) "is a statute of repose that limits the time within which parties may bring breach of contract and implied warranty actions against developers, builders, and certain others." Maycock, 207 Ariz. at 498, ¶ 15, 88 P.3d at 568. In this case, the first count alleged in Evans Withycombe's third-party complaint is that the subcontractors breached their subcontract with Evans Withycombe in accomplishing their work on the Weisses' home. The second count is for breach of warranty based on the subcontract. The statute makes clear that "no action . . . based in contract may be instituted . . . against a person who . . . performs or furnishes . . . testing, construction . . . more than eight years after substantial completion of the improvement." The statute further makes clear that a breach of warranty claim is "based in contract." Thus, pursuant to the plain language of the statute, the first two counts of Evans Withycombe's third-party complaint are barred.

¶ 10 Without explaining how the statute is ambiguous, Evans Withycombe argues that the trial court failed to consider the statutory purpose. It argues that we should interpret the statute only to bar claims brought by property owners. Otherwise, it maintains, the trial court's interpretation will allow the subcontractor who caused the defect to completely escape liability and oblige Evans Withycombe to bear the entire loss. It argues that the legislature would not have wished to achieve this result and accordingly the statute should be interpreted to only bar claims by property owners.

¶ 11 Evans Withycombe offers no authority to support its argument that the legislature desired only to restrict property owners from bringing contract-based construction claims after nine years. The plain language of the statute demonstrates otherwise.

¶ 12 Evans Withycombe further argues that even if the statutory meaning is plain, it should not be applied because it would lead to an absurd result. An absurd result is one "so irrational, unnatural, or inconvenient that it cannot be supposed to have been within the intention of persons with ordinary intelligence and discretion." State v. Estrada, 201 Ariz. 247, 251, ¶ 17, 34 P.3d 356, 360 (2001) (quoting Perini Land and Dev. Co. v. Pima County, 170 Ariz. 380, 383, 825 P.2d 1, 4 (1992)). Whenever a statute of repose applies, it bars at least some claims for relief. We have previously determined that § 12-552 "sets a period of time within which claims must be brought regardless of when the cause of action may accrue." Maycock, 207 Ariz. at 501, ¶ 28 n. 3, 88 P.3d at 571 n. 3; see also Amoco Prod. Co. v. Newton Sheep Co., 85 F.3d 1464, 1472 (10th Cir.1996) (statute of repose sets "absolute time limit beyond which liability no longer exists and is not tolled . . . because to do so would upset the economic balance struck by the legislative body"); Sch. Dist. No. 1J, Multnomah County, Or. v. ACandS, Inc., 5 F.3d 1255, 1259 (9th Cir.1993) (statute of repose embodies public policy of creating definite end to possible future litigation for past actions). That the statute bars all claims based on contract after the requisite period rather than a more defined set of contract claims does not make the statute absurd. Rather, it promotes the apparent purpose of the statute to establish a limit beyond which no suit may be pursued.

¶ 13 Nor is the application of the statute egregiously unfair to Evans Withycombe. The Weisses presumably brought suit against Evans Withycombe prior to the time when the statute of repose would have barred the Weisses' claims. At that time, Evans Withycombe could have asserted claims against its subcontractors. Instead of timely serving its subcontractors with any third-party claims, however, Evans Withycombe allowed more than two years to pass before it filed its third-party claims immediately before settling with the Weisses. During that time the bar became effective.

¶ 14 Moreover, contrary to Evans Withycombe's assertion, the statute does not absolutely deprive it of the ability to assert any claims against its subcontractors for their faults. Section 12-552 only bars Evans Withycombe from instituting or maintaining an action "based in contract."⁴

II. Evans Withycombe's Negligence Claim.

¶ 15 Evans Withycombe asserts that the trial court erred in dismissing its negligence claim against its subcontractors because § 12-552 only bars claims arising out of contract. The plain wording of the statute itself indicates that the bar only applies to claims based in contract. Nevertheless, Evans...