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Torts—Duty—Homebuilder Has No Duty to Subsequent Purchaser of House for Purely Economic Loss

Posted by Ted A. Schmidt | Aug 10, 2015 | 0 Comments

Sullivan v. Pulte Home Corp., __Ariz. Adv. Rep. __, No CV2010-004898 (App. Div. I, July 28, 2015)  (J. Downie)

HOMEBUILDER OWES NO DUTY BASED UPON STATUTE OR ORDINANCE TO SUBSEQUENT PURCHASER OF HOME WITH WHOM BUILDER HAS NO CONTRACTUAL RELATIONSHIP FOR PURELY ECONOMIC LOSS

Plaintiff purchased a home built by Pulte from the original homeowner. Subsequently plaintiff discovered settling of the home and sued Pulte for creating a latent defect -- improper footers and absence of a proper retaining wall.  Plaintiff suffered no physical injury related to the house settling.  The trial court granted Pulte's motion for summary judgment finding Pulte had no contractual relationship with the plaintiffs and therefore had no duty to them. The Arizona Court of Appeals affirmed.

The two significant factors supporting this decision are that the plaintiff suffered no physical injury and had no contractual relationship with Pulte.  Further plaintiffs stipulated they were not pursuing these claims based upon a common law negligence claim. Rather the claims were brought on a public policy-based tort duty arising out of the municipal building code and the regulations and statutes governing licensed contractors. 

The court of appeals rejected these arguments addressing  first the Phoenix Municipal Building Code§101.2  which expressly states, “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.”  As such, plaintiffs cannot argue that they are part of a class of people intended to be protected by the building code requirements. Therefore no duty is created to plaintiffs by this ordinance.  As to the statutes and regulations governing licensed contractors the court found the intent of the legislature is to provide protection to those who enter into contracts with contractors and not strangers to that contract. 

Finally the court found that where there is no allegation of a physical injury, the court must be circumspect about expanding the scope of a homebuilder's  duty for purely economic loss.   

Restatement (Third)  of  Torts: Liability  for  Economic Harm (“Restatement”), Section 1(a) states that “[a]n actor has no general duty to avoid the unintentional infliction of economic  loss  on  another, explaining that  such  duties are  “notably narrower” than duties to prevent physical harm and “that duties to avoid causing  economic  loss  require  justification  on more  particular  grounds than duties to avoid causing physical harm.” 

About the Author

Ted A. Schmidt

Ted's early career as a trial attorney began on the other side of the fence, in the offices of a major insurance defense firm. It was there that Ted acquired the experience, the skills and the special insight into defense strategy that have served him so well in the field of personal injury law. Notable among his successful verdicts was the landmark Sparks vs. Republic National Life Insurance Company case, a $4.5 million award to Ted's client. To this day, it is the defining case for insurance bad faith, and yet it is only one of several other multi-million dollar jury judgments won by Ted during his career. He is certified by the State Bar of Arizona as a specialist in "wrongful death and bodily injury litigation".

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