Hammer Homes, LLC v. City of Phoenix, No. 1 CA-CV 23-0114 (App. Div. I, December 21, 2023) (J. McMurdie) https://www.azcourts.gov/Portals/0/OpinionFiles/Div1/2023/1%20CA-CV%2023-0114.pdf

CITY HAS DUTY UNDER RESTATEMENT (SECOND) OF TORTS § 552 NOT TO GIVE FALSE INFORMATION REGARDING LAND USE RESTRICTIONS TO DEVELOPER AND CAN BE TORTIOUSLY LIABLE FOR PECUNIARY DAMAGES CAUSED BY THE RELIANCE UPON THE FALSE INFORMATION

 Plaintiff Hammer Homes purchased a piece of real estate relying upon representations by the City of Phoenix City Planner that there were no zoning related or land use stipulations affecting the property. After purchase, stipulations were discovered which plaintiff claimed rendered the real estate “undevelopable as planned.”  Plaintiff sued the City for $2.5 million in lost profits.  The trial court granted the City's rule 12(b)(6) motion to dismiss finding the City had no duty to plaintiff and that the Restatement (Second) of Torts § 552 did not create a duty where plaintiff was seeking legal advice and not factual information .  The Arizona Court of Appeals vacated and remanded the matter back to the trial court.

A duty of care can originate from a special relationships or relationships created by public policy.  In Arizona  public policy may be found in Restatement (Second) of Torts sections consistent with Arizona law.

Section 552(1) of the Restatement (Second) of Torts provides:

One who, in the course of his business, profession or

employment, or in any other transaction in which he has a

pecuniary interest, supplies false information for the

guidance of others in their business transactions, is subject to

liability for pecuniary loss caused to them by their justifiable

reliance upon the information, if he fails to exercise

reasonable care or competence in obtaining or

communicating the information.

Here the City had a pecuniary interest in the fees it charged plaintiff and the plaintiff's question of whether stipulations existed on the property was purely factual—either stipulations existed or did not.  Plaintiff was not asking for a legal interpretation of the stipulations or how they might apply to the property, just whether any existed.  Thus section 552 creates a duty here.