Hershey v. Rich Rosen Const. Co., s. 1

• Decision Date: 29 August 1991
• Docket Number: Nos. 1,CA-CV,s. 1
• Citation: 169 Ariz. 110,817 P.2d 55
• Parties: James R. and Marjatta A. HERSHEY, husband and wife, Plaintiffs-Appellees. v. RICH ROSEN CONSTRUCTION COMPANY, an Arizona corporation, Defendant-Appellant. 90-185, 1 90-228.
• Court: Arizona Court of Appeals

Page 55

817 P.2d 55

169 Ariz. 110

James R. and Marjatta A. HERSHEY, husband and wife, Plaintiffs-Appellees. v. RICH ROSEN CONSTRUCTION COMPANY, an Arizona corporation, Defendant-Appellant.

Nos. 1 CA-CV 90-185, 1 CA-CV 90-228.

Court of Appeals of Arizona Division 1, Department A.

Aug. 29, 1991.

[169 Ariz. 111] Steve T. Skivington, Scottsdale, for plaintiffs-appellees.

James Benham, Phoenix, for defendant-appellant.

OPINION

JACOBSON, Presiding Judge.

This action, brought by a subsequent purchaser of a residential home for damages caused by a builder's faulty stucco application more than twelve years prior to this suit, presents the following issues:

(1) whether the "reasonable inspection of the structure prior to purchase" required to recover for a latent defect under a theory of implied warranty was met by plaintiffs' inspection or whether an inspection by an expert was required; and

(2) whether the time period between the stucco installation and the filing of the complaint is an unreasonable time to extend a home builder's implied warranty of habitability and workmanship for a stucco installation.

Facts and Procedural Background

Appellant Rich Rosen Construction Co. (defendant) completed construction of the single family residence at issue in this case and sold it to the initial purchaser on April 1, 1976. In 1985 the initial owner sold the house to its second owner, who later added a room onto a western corner of the house. In November 1985, appellees Hershey (collectively, plaintiff) rented the house from the second owner, and lived there for six months prior to purchasing the residence in May 1986. During that tenancy, plaintiff did not experience any problems with the stucco. Prior to the purchase, plaintiff performed a "walk-around inspection," during which he did not see any cracks or defects in the stucco on the exterior of the house.

In April or May 1987, plaintiff first noticed "some bulging of the stucco on the southwest side of the house." He did not do anything about it at that time because "it didn't look to be a major problem." However, after a heavy rainstorm in August 1987, his daughter heard what she thought was water running behind the bedroom wall on the northwest side of the house. Plaintiff thought the roof might be leaking and went out to check the next day. He testified, "it looked as if the stucco was bulging from the wall. And there was a small hole where a piece had dropped out."

Thinking the stucco problem was due to rain damage, plaintiff filed a claim with his homeowner's insurance company, State Farm Fire & Casualty Co. The insurer responded in September 1987, denying the claim based on the opinion of its retained architect, Dwight L. Busby, P.E.:

[I]t is his determination that the various cracks and loose stucco results from the exterior application being improperly done at the time of construction. It is apparent that none of the exterior application of sheathing, building paper and stucco is weather approved, and it does not meet the Scottsdale Building Code (U.B.C.). Also in accordance with the building code, a layer of lath should have been applied prior to the application of the stucco.

Soon thereafter, plaintiff discovered the name of defendant, the builder, from his next door neighbor, who was an original owner and who had a similar problem with his stucco in 1979.

Plaintiff retained his own expert to examine the stucco, C. Randal Rushing, the secretary of Wall & Ceiling Industries of Arizona, a professional trade association. In October 1988, Rushing gave plaintiff the following written opinion:

I would classify the existing Stucco Exterior on your home to be one of the worst examples of material selection and application that I have encountered in the past 10-12 years.

....

There are numerous errors and building code violations in the above assembly.

....

I would categorize the workmanship on this structure (i.e., material selection and workmanship) as below average to almost criminal.

Rushing concluded that the existing construction consisted of gypsum board nailed to the exterior of the wood framing, with a woven fiberglass tape applied vertically to the joints of the gypsum board, with a layer of stucco approximately 1/8"' thick covered with a coating of paint. The City of Phoenix Construction Code required, however, as a minimum, two layers of 15 lb. felt over exterior grade gypsum sheathing, with 1 inch 20 gauge wire mesh in the base coat and approved wall assembly of 3/8"' to 1/2"' thick.

Plaintiff contacted defendant in March 1988, approximately seven months after he had discovered the problem, and requested that defendant repair the damage; defendant declined. Plaintiff filed a complaint against defendant in June 1988, and by an amended complaint alleged a claim for breach of implied warranty, seeking repair costs of $16,500.00 and attorneys' fees and costs.

Defendant answered, denying the allegations and generally asserting the defenses of statute of limitations, failure to state a claim, waiver, estoppel, and failure to make a reasonable inspection of the premises prior to purchase. After filing cross-motions for summary judgment, the parties stipulated to certain facts, and further agreed that the court should decide the case based on that record as well as on the basis of the testimony in plaintiff's deposition and the expert testimony of C. Randal Rushing.

Among the stipulated facts were defendant's admission that "the workmanship was below average," and that "the particular stucco process applied had deficiencies." Defendant also "agree[d] that the stucco process should last in excess of twelve years."

At the hearing on January 24, 1990, Rushing testified that his inspection of the exterior structure revealed "50 to 60 percent complete delamination of the outside base coat skin, paint coating, from the structure," with "bulges all over the building." The separation of the stucco from the building was apparently caused by the lack of internal reinforcement, or stucco netting. The Uniform Building Code, adopted by the City of Phoenix and the State of Arizona, requires "some type of external reinforcing wire." Rushing's subsequent visits to the house showed "extensive damage recurring. It will not stop." The cracks now go through to the interior perimeter, and the exterior sheathing has deteriorated to "basically mush," from water infiltration through the stucco separation into the gypsum board. Besides the lack of reinforcement, Rushing also testified that the lack of depth of the application was also substandard; "the only thing that's been holding that system on has been the paint."

Most significantly, Rushing testified that a properly applied stucco exterior of this type, with repainting every 10 to 15 years, would reasonably be expected to last from 30 to 50 years. Because of the low rainfall level in this area, the water damage would have taken a long time to become evident to a lay person, who would not be able to ascertain the depth of the materials or the structure of the application from a visual inspection.

In rendering judgment for plaintiff, the trial court made the following findings of fact and conclusions of law:

1. That the damage to the stucco was caused solely by poor workmanship;

2. That plaintiff's claim was not barred by the statute of limitations;

3. That the damage was not caused by normal wear and tear;

4. That the room addition [built by the previous owners], although a substantial alteration to the premises, did not void defendant's implied warranty of proper workmanship;

5. That the leak in the roof did not contribute to the damage to the stucco;

6. That plaintiff did conduct a reasonable inspection of the residence prior to purchase;

7. That defendant was not entitled to an award of attorneys' fees;

8. That the condition of the exterior walls of the residence constituted a breach of implied warranty by defendant;

9. That plaintiff's damages were $16,500.00;

10. That plaintiff is entitled to reasonable attorneys' fees and costs.

The court further found that "there was no reasonable indication of a serious stucco problem until 1987, when the stucco first began falling off in large pieces and there was bulging in various spots all over the house. This action was then brought within a year of such notice. It was certainly timely for a breach of the [implied] warranty of habitability and proper workmanship which first reasonably evidenced itself only in 1987."

In its minute entry, the court also made the following findings:

There is no statute of limitations defense because in Arizona the builders' implied warranty of habitability and proper workmanship extends to subsequent purchasers. While not unlimited in time, it extends for a reasonable period of time depending on the component part of the house involved. Sheibels v. Estes Homes, 28 Ariz.Adv.Rep. 24, 25 [161 Ariz. 403, 405, 778 P.2d 1299, 1301] (App. 2/23/89). While five years may be reasonable for a warranty for a septic tank or for termite protection, because they both have a useful life of approximately five years, the component of exterior stucco has a normal expected life of thirty to fifty years. Therefore, an extension of the warranty on it for twelve years is certainly reasonable. In light of Mr. Rushing's testimony as to the reasonable life span of a properly applied stucco application, the Court finds that the warranty life has not run out here and there is no violation of A.R.S. § 12-548 and its six year statute of limitations.

....

Another of defendant's suggestions of a defense was that plaintiffs failed to reasonably inspect the home before purchasing. It claims that such an inspection would have revealed the potential of the disastrous defect of workmanship this house had. There is no evidence of such a claim. Plaintiffs bought the home in 1986. At that time, there were a few cracks in the stucco of a normal nature. Not...