Resolution Trust Corp. v. Western Technologies, Inc.

• Decision Date: 16 June 1994
• Docket Number: CA-CV
• Citation: 179 Ariz. 195,877 P.2d 294
• Parties: , 63 USLW 2046 RESOLUTION TRUST CORPORATION, as Conservator of Southwest Savings & Loan Association, F.A., Plaintiff-Appellee, Cross Appellant, v. WESTERN TECHNOLOGIES, INC., Defendant-Appellant, Cross Appellee. 192-0015.
• Court: Arizona Court of Appeals

Page 294

877 P.2d 294

179 Ariz. 195, 63 USLW 2046

RESOLUTION TRUST CORPORATION, as Conservator of Southwest Savings & Loan Association, F.A., Plaintiff-Appellee, Cross Appellant, v. WESTERN TECHNOLOGIES, INC., Defendant-Appellant, Cross Appellee.

1 CA-CV 92-0015.

Court of Appeals of Arizona Division 1, Department D.

June 16, 1994.

[179 Ariz. 197] Gammage & Burnham by Richard K. Mahrle, Phoenix, for plaintiff-appellee, cross appellant.

Green & Baker by Michael L. Green, Michael Goodwin, Katherine E. Baker, Denise H. Troy, Scottsdale, for defendant-appellant, cross appellee.

OPINION

McGREGOR, Judge.

Western Technologies, Inc. (WTI) successfully defended an action brought by the Resolution Trust Corporation (RTC). The superior court concluded that federal statutes prevented it from awarding WTI attorneys' fees against the RTC, unless WTI first pursued an administrative claim for those fees. We conclude that the trial court erred and remand for entry of an award of attorneys' fees in favor of WTI. We also affirm summary judgment in WTI's favor.

I.

In May 1983, WTI entered a contract with Southwest Savings and Loan Association (Southwest) to perform geotechnical services for a proposed office development called Fairmount Place. ¹ The agreement provided in part:

The purposes of our geotechnical services are to evaluate subsurface soil and groundwater conditions, recommend procedures for the grading and underslab treatment in the building and parking areas, recommend bearing pressures and estimate settlements for the moderately shallow spread footings and belled caissons, present surface and subsurface drainage recommendations, and recommend flexible pavement design thickness(es) for the at-grade parking lot.

In June, August, and November 1983, WTI issued geotechnical reports. Its June report stated in part:

Although the existence of subsurface facilities such as seepage pits, drywells, and underground utilities was not apparent, their presence may be anticipated. Therefore, the exposed excavations should be inspected for such features during construction.

At the time WTI performed its work, two gas pumps and four underground storage tanks (USTs) were present at the Fairmount Place site. In addition, one of the businesses on the site was a street sweeping operation that fueled its own vehicles. The contractor removed two of the USTs during construction of Fairmount Place.

In 1988, Southwest agreed to sell the Fairmount Place site to Facet Financial Corporation (Facet). In connection with the proposed sale, Thomas-Hartig & Associates, an engineering firm, completed an environmental assessment report. The report disclosed the presence of USTs and soil contaminated by petroleum hydrocarbons and other hazardous substances at the site. Facet refused to consummate the transaction when the USTs were discovered.

The RTC, acting as Southwest's conservator, filed its First Amended Complaint against WTI and others on June 8, 1990. ² RTC alleged that WTI knew or should have known of the existence of the USTs and contamination of the site and that WTI breached its agreement with Southwest by failing to discover or to disclose the USTs and contamination. RTC sought to recover damages against WTI on the basis of breach of contract and negligence.

After filing its answer, WTI moved for summary judgment, relying upon affidavits from three expert engineers who opined that the standard of care for a geotechnical engineer did not include responsibility to locate and identify USTs or to discover soil contamination. The experts concluded that WTI had not breached the standard of care in its performance of the agreement. After RTC deposed the experts, it filed a response in which it attempted to show, through the experts' deposition testimony, that WTI breached the standard of care; it further argued that the motion for summary judgment did not address its breach of contract claim. After argument the trial court granted WTI's motion for summary judgment.

WTI then applied for an award of attorneys' fees, relying upon the terms of its contract with Southwest. WTI also sought sanctions against the RTC and its lawyers pursuant to Arizona Revised Statutes Annotated ("A.R.S.") section 12-349 and Rule 11 of the Arizona Rules of Civil Procedure. Seven days later, RTC was appointed receiver for Southwest. The court denied the request for fees and sanctions and entered final judgment in WTI's favor pursuant to Rule 54(b) of the Arizona Rules of Civil Procedure. WTI filed a timely notice of appeal, and RTC filed a timely notice of cross appeal. We have jurisdiction under A.R.S. section 12-2101.B.

II.

We first address RTC's cross appeal challenging the propriety of summary judgment because if we reverse this ruling, then the issue whether the court should have awarded WTI attorneys' fees or sanctions becomes moot. RTC argues (1) the court incorrectly found that no evidence supported RTC's allegation that WTI had failed to meet its standard of care on RTC's tort claim and (2) the court ignored RTC's claim based on breach of contract.

A.

RTC asserts that, contrary to the trial court's ruling, evidence existed from which a jury could find that WTI negligently failed to include notice of the USTs in its report. RTC asserts that WTI's own experts provided the evidence by testifying that (1) if a geotechnical engineer knows that USTs are present, its report should include that fact because USTs can affect the soil's suitability for construction and (2) a geotechnical engineer should know of the existence of USTs when gas pumps and a refueling operation are located on site. Because these clues that USTs were on the site existed when WTI prepared its report, RTC asserts the trial court should have allowed the jury to decide whether WTI negligently failed to discover and report them. We disagree.

The scope of WTI's work as outlined in the agreement was to "evaluate subsurface soil and groundwater conditions." Each of WTI's expert witnesses stated that WTI performed its services within generally accepted standards of practice, that the applicable standard of care did not require WTI to provide environmental site assessment services as part of a foundation design investigation, and that WTI had no responsibility to discover or identify any underground USTs or site contamination. The expert witnesses also opined that WTI would have been responsible to discover and identify USTs or contamination only if WTI had been retained specifically to perform an environmental site assessment.

RTC contends that the "sole premise" of the motion for summary judgment was WTI's contention that it was not required to perform an environmental site assessment. RTC also asserts that the experts' subsequent deposition testimony raises the inference that WTI should have discovered and reported the USTs to Southwest. We disagree with both of these assertions.

WTI's experts all testified in their affidavits that under its contract with Southwest, "WTI had no responsibility to discover or identify any underground storage tanks which may have been present at the Fairmount Plaza [sic] site...." RTC attempts to take issue with this opinion by pointing out that in their deposition testimony, the experts agreed that the presence of a UST is part of the subsurface soil condition that a geotechnical engineer should evaluate. RTC points to testimony in which the experts stated that if a geotechnical engineering firm discovered an underground structure, such as a UST, then it "would mention them in [its] report as it would affect the support of the foundations of the building or ... structure that [it is] helping to design."

This testimony, however, merely indicates that USTs can be important because their presence could affect subsurface conditions. The testimony does not address the issue whether the geotechnical engineer's standard of care requires it to discover the tanks. WTI submitted uncontroverted evidence that it was not required to do so as part of its geotechnical investigation and analysis. RTC submitted no controverting evidence and did not overcome WTI's motion for summary judgment on this essential point. See, e.g., National Housing Ind. v. E.L. Jones Dev. Co., 118 Ariz. 374, 377, 576 P.2d 1374, 1377 (App.1978) (essential element of professional malpractice is plaintiff's damage resulting from defendant's conduct below the applicable standard of care; expert testimony is usually necessary to establish the standard of care).

B.

RTC next contends that WTI's motion for summary judgment, which was based solely on a negligence theory, did not address WTI's liability for breach of contract. The contract required WTI to "evaluate subsurface soil and groundwater conditions." RTC asserts that discovering a UST clearly falls within the meaning of that phrase. We disagree.

In the typical situation between client and professional, the law implies a promise by the professional to "render competent ... service." Barmat v. John & Jane Doe Partners A-D, 155 Ariz. 519, 521, 747 P.2d 1218, 1220 (1987).

As a matter of public policy, attorneys, accountants, and other professionals owe special duties to their clients, and breaches of those duties are generally recognized as torts. The essential nature of actions to recover for the breach of such duties is not one "arising out of contract," but rather one arising out of tort--breach of legal duties imposed by law.

Id. at 523, 747 P.2d at 1222. In some cases, however, an action against a professional can be founded in contract:

Where ... the duty breached is not imposed by law, but is a duty created by the contractual relationship, and would not exist "but for" the contract, then breach of either express covenants or those necessarily implied from them sounds in contract.

. . . . .

Absent some special contractual agreement or undertaking between those in the professional relationship, ... a professional malpractice...