Sullivan v. Pulte Home Corp.

• Decision Date: 28 July 2015
• Docket Number: No. 1 CA–CV 14–0199.,1 CA–CV 14–0199.
• Citation: 237 Ariz. 547,718 Ariz. Adv. Rep. 7,354 P.3d 424
• Parties: John F. SULLIVAN and Susan B. Sullivan, Plaintiffs/Appellants, v. PULTE HOME CORPORATION, Defendant/Appellee.
• Court: Arizona Court of Appeals

237 Ariz. 547

354 P.3d 424

718 Ariz. Adv. Rep. 7

John F. SULLIVAN and Susan B. Sullivan, Plaintiffs/Appellants

v.PULTE HOME CORPORATION, Defendant/Appellee.

No. 1 CA–CV 14–0199.

Court of Appeals of Arizona, Division 1.

July 28, 2015.

John F. Sullivan Esq. By John F. Sullivan, Phoenix, Counsel for Plaintiffs/Appellants.

Dickinson Wright PLLC By Stephen E. Richman, Anne L. Tiffen, Phoenix, Co–Counsel for Defendant/Appellee.

Ellen M. Bublick, Tucson, Co–Counsel for Defendant/Appellee.

Presiding Judge MARGARET H. DOWNIE delivered the Opinion of the Court, in which Judge RANDALL M. HOWE joined and Judge PATRICIA K. NORRIS dissented.

OPINION

DOWNIE, Judge:

¶ 1 This appeal presents the question whether a subsequent (i.e., non-original) homeowner may maintain a negligence cause of action against a homebuilder for economic losses arising from latent construction defects unaccompanied by physical injury to persons or other property. The homeowners in this case contend that a public policy-based tort duty arises from a municipal building code, as well as from statutes and regulations governing residential contractors. We disagree and therefore affirm the judgment of the superior court.

FACTS AND PROCEDURAL HISTORY

¶ 2 Defendant/Appellee Pulte Home Corporation developed and built homes in a Phoenix hillside community. In 2000, Pulte sold the home at issue in these proceedings to the original homeowners, who, in 2003, sold the property to Plaintiffs/Appellants John and Susan Sullivan. In 2009, the Sullivans discovered problems with the home's hillside retaining wall. An engineering firm they retained concluded that Pulte had constructed the retaining wall and prepared the home site without proper structural and safety components, including footings, rebar, and adequate drainage and grading. Pulte declined the Sullivans' request to make repairs.

¶ 3 The Sullivans sued Pulte, alleging eleven separate counts, including several negligence-based claims. The Sullivans sought to recover out-of-pocket costs associated with identifying and remediating the alleged defects, as well as damages for diminution in the property's value. Pulte moved to dismiss all counts of the complaint pursuant to Arizona Rule of Civil Procedure 12(b)(6), arguing that the implied warranty claim was barred by the statute of repose and that the tort claims were impermissible under the economic loss doctrine (“ELD”).¹ The superior court granted Pulte's motion, and the Sullivans appealed.

¶ 4 This Court affirmed the dismissal of all counts of the Sullivans' complaint except the negligence claims. Sullivan v. Pulte Home Corp., 231 Ariz. 53, 60, ¶¶ 30–31, 290 P.3d 446, 453 (App.2012), vacated in part, 232 Ariz. 344, 306 P.3d 1 (2013). We held that because the Sullivans were not in privity with Pulte and had no contract with the homebuilder, the ELD did not bar their negligence claims. Although the Arizona Supreme Court vacated the portion of our opinion discussing the ELD, it nevertheless agreed that the ELD did not bar the Sullivans' negligence claims. Sullivan v. Pulte Home Corp., 232 Ariz. 344, 345–47, ¶¶ 7, 11, 15, 306 P.3d 1, 2–4 (2013) (“Sullivan I ”). Sullivan I held that the ELD “protects the expectations of contracting parties, but, in the absence of a contract, it does not pose a barrier to tort claims that are otherwise permitted by substantive law.”Id. at 346, ¶ 11, 306 P.3d at 3. Instead, courts must “consider the applicable substantive law to determine if non-contracting parties may recover economic losses in tort.” Id. at 347, ¶ 14, 306 P.3d at 4. The supreme court cautioned that its opinion should not be read as implying that the Sullivans would ultimately prevail on their negligence claims, stating:

Our holding that the economic loss doctrine does not bar the Sullivans' tort claims does not, of course, imply that those claims will ultimately succeed. Cf. Flagstaff Affordable Hous., 223 Ariz. at 327–28, ¶ 39, 223 P.3d at 671–72 (directing courts to consider applicable substantive law to determine if non-contracting parties may recover economic losses in tort); Draft Restatement § 6(2), reporter's note to cmt. c (noting division of authority but concluding that subsequent home purchasers should not recover in tort from homebuilder for negligent construction). As the court of appeals noted, Pulte made other arguments challenging the legal sufficiency of the tort claims that were not addressed by the trial court, which may consider those arguments in the first instance on remand.

Sullivan I, 232 Ariz. at 347, ¶ 14, 306 P.3d at 4.

¶ 5 On remand to the superior court, Pulte moved to dismiss the negligence claims pursuant to Rule 12(b)(6), arguing “a homebuilder such as Pulte does not owe a duty of care to a subsequent purchaser (such as plaintiffs) to prevent them from economic harm.” The superior court granted Pulte's motion, and the Sullivans again timely appealed.

DISCUSSION

¶ 6 “Whether the defendant owes the plaintiff a duty of care is a threshold issue; absent some duty, an action for negligence cannot be maintained.” Gipson v. Kasey, 214 Ariz. 141, 143, ¶ 11, 150 P.3d 228, 230 (2007). “Duties of care may arise from special relationships based on contract, family relations, or conduct undertaken by the defendant.” Id. at 145, ¶ 18, 150 P.3d at 232.

Additionally, “[p]ublic policy may support the recognition of a duty of care.” Id. at 145, ¶ 23, 150 P.3d at 232. “In many instances, the legislature reflects public policy by codifying certain duties and obligations.” Monroe v. Basis Sch., Inc., 234 Ariz. 155, 160, ¶ 17, 318 P.3d 871, 876 (App.2014). We consider the duty question de novo. See N. Peak Constr., LLC v. Architecture Plus, Ltd., 227 Ariz. 165, 167, ¶ 13, 254 P.3d 404, 406 (App.2011) (dismissal for failure to state a claim reviewed de novo ); Home Builders Ass'n of Cent. Ariz. v. City of Maricopa, 215 Ariz. 146, 149, ¶ 6, 158 P.3d 869, 872 (App.2007) (questions of law and statutory interpretation reviewed de novo ).

¶ 7 At oral argument before this Court, the Sullivans disavowed any assertion that a duty exists based on common law principles of negligence. They instead premise their duty argument on a municipal building code and on Arizona statutes and regulations governing residential contractors. The Sullivans contend they “fall within the class of persons protected by Arizona's public policy framework which mandates specific design and construction standards for safe residential construction.” Specifically, they argue:

The duties imposed by law upon Pulte are found in: the Building Code adopted by the City of Phoenix (specifying minimum standards in design and construction to protect, inter alia, life or limb, health, property); the Arizona Administrative Code, AAC R4–9–108 (Registrar of Contractors ... regulations establishing Workmanship Standards); and, A.R.S. § 32–1154 (mandating compliance with building codes and ROC regulations).

¶ 8 Turning first to the City of Phoenix Uniform Building Code (“Building Code”), the Sullivans rely on its stated purpose of “provid[ing] minimum standards to safeguard life or limb, health, property and public welfare by regulating and controlling the design, construction, quality of materials, use and occupancy, location and maintenance of all buildings and structures ....” Building Code § 101.2. However, that same section of the Building Code specifically disclaims any intent to protect or benefit a particular group or class, stating, “[T]he purpose of this code is not to create or otherwise establish or designate any particular class or group of persons who will or should be especially protected or benefited by the terms of this code.” Id.

¶ 9 A statute or regulation typically gives rise to a tort duty premised on public policy only if it “is designed to protect the class of persons, in which the plaintiff is included, against the risk of the type of harm which has in fact occurred as a result of its violation.” Estate of Hernandez v. Ariz. Bd. of Regents, 177 Ariz. 244, 253, 866 P.2d 1330, 1339 (1994). It would be anomalous, as well as inconsistent with this well-established legal tenet, to premise a tort duty on a regulatory scheme that expressly eschews any intent to protect or benefit a class or group of persons. Cf. Tellez v. Saban, 188 Ariz. 165, 169, 933 P.2d 1233, 1237 (App.1996) (rejecting negligence per se claim based on statute prohibiting rental car company from leasing to unlicensed drivers because “statutes intended for the protection of the public at large rather than an individual or class of persons do not create the standard of conduct required of a reasonable person”); Jackson v. City of Seattle, 158 Wash.App. 647, 244 P.3d 425, 430, ¶ 16 (2010) (“[Plaintiff] does not persuasively explain how we could view the [Seattle] stormwater code as a foundation for a negligence action in spite of the express disclaimer of a purpose to designate a protected class and the express terms making the code enforceable only by the city.”). Thus, even assuming for the sake of argument that a municipal building code is of sufficient legal stature to support imposition of public policy-based tort duties, the code at issue here reveals no intention to protect or benefit subsequent homeowners who experience economic loss.

¶ 10 Although Arizona's appellate courts have held that statutes enacted for public safety may support public policy-based tort duties, they have done so largely in the context of injury and death cases. See, e.g., Gipson, 214 Ariz. at 146, ¶ 26, 150 P.3d at 233 (defendant providing prescription drugs to woman who subsequently gave them to third party owed duty based on criminal statute “designed to avoid injury or death to people who have not been prescribed prescription drugs”); Estate of Hernandez, 177 Ariz. at 251–53, 866 P.2d at 1337–39 (statute making it unlawful to provide alcohol to minors supported duty by defendants serving alcohol to minor driver who later injured plaintiff); Alhambra Sch....