North Peak Constr. Llc v. Plus

• Decision Date: 26 April 2011
• Docket Number: No. 1 CA–CV 10–0017.,1 CA–CV 10–0017.
• Citation: North Peak Constr. Llc v. Plus, 227 Ariz. 165, 254 P.3d 404, 607 Ariz. Adv. Rep. 20 (Ariz. App. 2011)
• Parties: NORTH PEAK CONSTRUCTION, LLC, an Arizona limited liability company, Plaintiff/Appellant,v.ARCHITECTURE PLUS, LTD, an Arizona corporation; and Mark Wayne Fredstrom and Jane Doe Fredstrom, husband and wife, Defendants/Appellees.
• Court: Arizona Court of Appeals

227 Ariz. 165

254 P.3d 404

607 Ariz. Adv. Rep. 20

NORTH PEAK CONSTRUCTION, LLC, an Arizona limited liability company, Plaintiff/Appellant,

v.ARCHITECTURE PLUS, LTD, an Arizona corporation; and Mark Wayne Fredstrom and Jane Doe Fredstrom, husband and wife, Defendants/Appellees.

No. 1 CA–CV 10–0017.

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

April 26, 2011.

Jennings, Haug & Cunningham, LLP By D. Kim Lough, Hillary P. Gagnon, Attorneys for Plaintiff/Appellant.Carmichael & Powell, P.C.By Sid A. Horwitz, Attorneys for Defendants/Appellees.

OPINION

GEMMILL, Judge.

¶ 1PlaintiffNorth Peak Construction, LLC(“North Peak”) filed a complaint in superior court against DefendantsArchitecture Plus, Ltd. and Mark and Audrey Fredstrom(collectively “Architect”), asserting claims for breach of implied warranty and negligence.North Peak appeals the court's grant of Architect's motion to dismiss the breach of implied warranty claim.Because we conclude that North Peak stated a valid claim for relief against Architect for breach of implied warranty, we reverse and remand for further proceedings.

FACTS AND PROCEDURAL HISTORY

¶ 2 In reviewing the dismissal of a claim under Arizona Rule of Civil Procedure 12(b)(6), we accept well-pled factual allegations in the complaint as true and resolve any conflicting inferences in favor of the non-moving party.S.W. Paint & Varnish Co. v. Ariz. Dep't of Envtl. Quality,191 Ariz. 40, 41, 951 P.2d 1232, 1233(App.1997), aff'd in part,194 Ariz. 22, 976 P.2d 872(1999).

¶ 3 North Peak, a limited liability company, is a licensed residential contractor.Vern Haugen is the principal and managing member of North Peak.Architecture Plus is an architectural firm, licensed in Arizona.Mark Fredstrom is the principal architect at Architecture Plus.

¶ 4 According to the complaint, Haugen owned a hillside lot in Scottsdale that has an extraordinary view of the city.The view, however, is limited because of the lot's irregular shape.Haugen planned to build a home that would take advantage of the lot's city view.Haugen entered into a contract with Architect for the design of a custom home to be built on the lot.The contract required Architect to consider the requirements of the owner in designing the home.Haugen provided Architect with a topological map, marking the corridor within which Architect was to design and align the house.Haugen wanted to build the home within this “limited view corridor” in order to maximize the view of the city.Haugen discussed with Fredstrom the importance of properly orienting the home on the lot to maximize the view.Haugen planned to have North Peak build the house according to Architect's design.

¶ 5 Haugen then sold the lot and Architect's preliminary plans to Russell Scaramella.Scaramella entered into a separate contract with Architect “for further design and alterations to the [home].”The contract between Scaramella and Architect contained the same written terms as the contract between Haugen and Architect.The final construction plans for the home were signed and sealed by Fredstrom.

¶ 6 Scaramella contracted with North Peak to build the home.At some point in 2006 after North Peak began construction, it discovered that Architect's plans aligned the home so that it faced a water tank and mountain rather than the city lights.As a result, North Peak alleges that it demolished the construction work it had already performed and rebuilt the home, costing approximately $164,803.17 in additional expenses.

¶ 7 In January 2009, North Peak filed a complaint against Architect in superior court, asserting a claim for breach of implied warranty and a claim for negligence.In its allegation that Architect breached an implied warranty, North Peak claimed it had relied upon Architect's “design plans and their implied representation that such plans were prepared with the reasonable skill, care, and diligence of a competent design professional, in a non-negligent manner, and in conformance with the project specifications as provided by Mr. Haugen and Mr. Scaramella.”North Peak alleged Architect had “breached the implied warranty by providing deficient and substandard workmanship in designing and orienting the custom home on the [l]ot without maximizing the views of the city lights as expressly required.”North Peak requested attorneys' fees based on Arizona Revised Statutes(“A.R.S.”)section 12–341.01(A)(2003), claiming its implied warranty claim arose out of contract.North Peak's negligence claim alleged Architect fell below the standard of care when it “failed to orient the custom residence so to properly provide the views of the city lights.”

¶ 8 Architect filed a motion to dismiss the breach of implied warranty claim.Relying on Barmat v. John and Jane Doe Partners A–D,155 Ariz. 519, 747 P.2d 1218(1987), Architect argued that “the essence of [North Peak's] claim is one for negligence” and that “there is no contractually-based claim for breach of implied warranty insofar as design professionals are concerned.”According to Architect, North Peak asserted the implied warranty claim in an “attempt to convert an action for which attorneys' fees are not recoverable into one in which attorneys' fee[s] are recoverable.”

¶ 9 At oral argument on the motion, Architect referred to North Peak's breach of implied warranty claim as a claim for attorneys' fees and phrased the issue before the court as “whether Plaintiff has pleaded a claim for attorneys' fees.”Architect argued that asserting the breach of implied warranty claim was “no different than reasserting the claim for negligence” because the warranty Architect was alleged to have breached was “nothing more than the warranty to act in a non-negligent manner.”

¶ 10The court agreed that the implied warranty claim was essentially a claim for attorneys' fees.Relying on language from Barmat and this court's now-vacated decision in Flagstaff Affordable Hous. Ltd., P'ship v. Design Alliance, Inc.,221 Ariz. 433, 212 P.3d 125(App.2009), vacated by223 Ariz. 320, 223 P.3d 664(2010), the trial court concluded that North Peak's complaint alleged “professional negligence” and such allegations “sound in tort, rather than contract.”As a result, the court dismissed the implied warranty claim.

¶ 11 Architect then filed a motion for summary judgment on the remaining negligence claim, arguing it was barred by the statute of limitations.The court granted the motion and entered a signed order dismissing North Peak's complaint in its entirety.

¶ 12 North Peak timely appeals.We have jurisdiction in accordance with A.R.S. § 12–2101(B)(2003).

ANALYSIS

¶ 13 On appeal, North Peak does not challenge the propriety of the dismissal of the negligence claim.Accordingly, the fundamental issue on appeal is whether the court erred in dismissing North Peak's claim for breach of implied warranty for failure to state a claim upon which relief can be granted.We review de novo a trial court's grant of a motion to dismiss for failure to state a claim.Phelps Dodge Corp. v. El Paso Corp.,213 Ariz. 400, 402, ¶ 8, 142 P.3d 708, 710(App.2006).We will uphold the dismissal only if North Peak “could not be entitled to relief under any facts susceptible of proof under the claims stated.”Donnelly Constr. Co. v. Oberg/Hunt/Gilleland,139 Ariz. 184, 186, 677 P.2d 1292, 1294(1984), overruled on other grounds byGipson v. Kasey,214 Ariz. 141, 144, ¶¶ 14–17, 150 P.3d 228, 231(2007).¹

Breach of Implied Warranty Recognized in Donnelly

¶ 14The trial court agreed with Architect that “there is no contractually-based claim for breach of implied warranty insofar as design professionals are concerned.”In Donnelly, however, the supreme court held that a claim for breach of an implied warranty may be brought against a design professional even in the absence of privity.139 Ariz. at 188–89, 677 P.2d at 1296–97.

¶ 15Donnelly arose out of a bid the Coconino County Board of Supervisors solicited for improvements to a school.139 Ariz. at 185, 677 P.2d at 1293.One of the documents available to the bidders was a site plan that included engineering specifications prepared by Oberg/Hunt/Gilleland (“OHG”), an architectural firm.Id.In preparing its bid, Donnelly Construction Company relied on the site plan and the associated specifications.Id.The board of supervisors eventually accepted Donnelly's bid.Id.However, after beginning construction, Donnelly discovered that the plans and specifications OHG had prepared were incorrect.Id. at 185–86, 677 P.2d at 1293–94.The faulty plans resulted in increased construction costs to Donnelly.Id. at 186, 677 P.2d at 1294.Donnelly sued the school district and OHG for the increased costs, asserting claims of negligent misrepresentation, negligence, and breach of the implied warranty that OHG's plans were accurate.Id.OHG filed a Rule 12(b)(6) motion to dismiss, asserting (among other arguments) lack of privity between Donnelly and OHG.Id.The trial court granted the motion, and OHG ultimately petitioned the Arizona Supreme Court for review following a reversal by the Court of Appeals.Id.

¶ 16 In ruling that the trial court erred in granting the motion to dismiss, our supreme court held that a contractor need not be in privity with an architect to sue the architect for negligence and breach of implied warranty.Id. at 188–89, 677 P.2d at 1296–97.The court recognized that the implied warranty given by design professionals is “that they have exercised their skills with care and diligence and in a reasonable, non-negligent manner.”Id. at 189, 677 P.2d at 1297.Accordingly, the court held that Donnelly was able to go forward with its breach of implied warranty claim and its negligence claim.

¶ 17The facts before us are analogous to Donnelly.North Peak, alleging it relied to its detriment on Architect's faulty design plans, brought claims for negligence and breach of implied warranty against...