Cal-Am Properties Inc. v. Edais Engineering Inc., No CV-21-0129-PR (May 23, 2022) (J. Lopez)
Cal-Am Properties, Inc.[Cal-Am] leased an RV park. Cal-Am hired VB Nickle [Nickle] to design and construct a banquet/concert hall on the property. Nickle hired Edais Engineering, Inc. [Edais] to survey and stake the project. Cal-Am had no contractual relationship with Edais. Edais admitted its placement of the stakes was defective resulting in the hall being constructed ten feet north of where it should have been eliminating eight RV parking spaces. Cal-Am sued Edais alleging several theories including negligence. The trial court granted summary judgment to Edias finding Cal-Am could not recover its purely economic damages. The Arizona Court of Appeals affirmed the trial court based upon the absence of a duty by Edais to Cal-Am. The Arizona Supreme Court affirmed the trial court and court of appeals and in so doing overruled Donnelly Constr. Co. v. Oberg/Hunt/Gilleland, 139 Ariz. 184, 187 (1984).
Plaintiff's suit relied upon Donnelly's holding that a design professional owed a duty of care for “foreseeable injuries to foreseeable victims.” Subsequent to Donnelly the Arizona Supreme Court published Gipson v. Kasey, 214 Ariz. 141, 143 (2007) which held the question of duty is one for the court, and the question of foreseeability is not a factor in making that determination. To establish a duty there must be a special relationship between the parties or public policy supporting the creation of duty.
In ruling that no duty exists here, the supreme court expressly stated that a duty may exist between a design professional and those not in privity, but the facts of this case do not support such a finding as no preexisting recognized relationship existed between Cal-Am and Edias.
Here, no contractual or familial relationship exists between
Cal-Am and Edais. And although liability for a joint undertaking may exist
despite a lack of privity between two parties, this concept necessarily
involves conduct a defendant undertook directly with or for a plaintiff, see,
e.g., Stanley v. McCarver, 208 Ariz. 219, 223 ¶ 13 (2004) (finding a duty where
doctor agreed, for consideration, to interpret patient's medical record and
report results), and no liability exists where, as here, parts of an overall
enterprise were organized by another entity and the defendant's relevant
undertaking was with and for that entity. Thus, no “special relationship”
gives rise to a duty in this case.
Statutes and regulations can create a duty as a matter of public policy. However, here, the statutes and regulations cited by plaintiff are not designed to protect plaintiff but rather to protect the safety, health and welfare of people who enter a structure. Similarly the Restatement (Second) of Torts Section 324A does not create a duty because the defective staking did not physically harm the land. Restatement (Third) of Torts Section 6 would require reliance on Edais' staking by Cal-Am. Here it was Nikle and not Cal-Am who relied upon Edias' staking.
Here Cal-Am's remedy is to sue the contractor Nickle for breach of contract and Edias for breach of contract as a third-party beneficiary to the contract. “Consequently, Donnelly's demise does not insulate design professionals from legal consequence for their negligence.”