Sullivan v. Pulte Home Corporation (7/28/2015)

August 4, 2015

Arizona Court of Appeals Division One holds homebuilder not liable to non-original homeowner’s economic loss arising from construction defects.

Pulte Home Corporation constructed a hillside home and sold it to original owners who then sold it to the Sullivans.  After Pulte refused to make repairs that the Sullivans requested related to a faulty retaining wall, the Sullivans sued Pulte.  After one round of appeals and remand, the trial court dismissed the Sullivans’ remaining negligence claim, holding that a homebuilder does not owe a duty of care to a subsequent purchaser to prevent economic harm.  The Sullivans appealed.

On appeal, the Sullivans argued that Pulte’s duty arose from the City of Phoenix building code and on Arizona statutes and regulations governing residential contractors.  As to the city code, the Court of Appeals noted that the same section on which the Sullivans relied expressly disclaimed any intent to protect a particular class or group.  Because a statute only gives rise to a tort duty based on public policy where it is designed to protect a class of persons, in which the plaintiff is included, against the kind of harm which in fact occurred, the Court of Appeals rejected the Sullivans’ argument.  The court also rejected the Sullivans’ reliance on state statutes and regulations governing licensed contractors.  After noting that the general purpose of these provisions was to protect the public from unscrupulous contractors, the court observed that the Sullivans have no contract or other relationship with Pulte.  The court declined to expand civil remedies based on these provisions, reasoning that this was the province of the legislature.

Judge Downie authored the opinion, and Judge Howe concurred.

Judge Norris dissented, arguing that the Sullivans’ costs to repair a deficient retaining wall are exactly what Phoenix’s building code was designed to prevent.  The dissent noted that the building code specifically addressed the minimum standards for retaining wall construction, and that the code in general was designed to protect against risks to health and property.  The dissent also argued that the majority read too restrictively the “class of persons” element in public policy-based tort duties, and that subsequent homeowners should be included in that class.