Basic HTML Version
52
Geotechnical News • March 2013
www.geotechnicalnews.com
ASFE NEWS
to make the marketplace a more
welcoming, more appreciative, and
less risk-prone place to work. We
have many laurels to rest on, but if
you know ASFE, you know we don’t
rest. There’s too much to do. I greatly
appreciate the opportunity you’ve
given me to help get it done.
From the Bench
Vern Haugen, the CEO of North Peak
Construction, LLC (“North Peak”),
owned a hillside lot in Scottsdale, AZ.
Although the lot afforded an extraor-
dinary view of the city, the view was
limited because of the lot’s irregular
shape. Haugen retained Architecture
Plus, Ltd. to design a home that would
take maximum advantage of the view.
Haugen met with Mark Fredstrom –
the principal of Architecture Plus – to
emphasize the importance of home
orientation and to present a topological
map that illustrated the corridor within
which the house had to be aligned.
Fredstrom submitted preliminary
architectural plans and, soon thereaf-
ter, Haugen sold the lot and the plans
to Russell Scaramella. Scaramella then
entered into a separate contract with
Architecture Plus “for further design
and alterations to the [home].” The
contract contained the same writ-
ten terms as the agreement between
Haugen and the architect. Fredstrom
signed and sealed the final plans.
Plans in hand, Scaramella hired
North Peak to build the home. North
Peak began construction in 2006
and quickly discovered that Fred-
strom’s plans aligned the home so
it faced a water tank and mountain
rather than the city lights. North Peak
subsequently alleged that it incurred
damages of $164,803 to demolish
construction work it had already
performed and then rebuild the home.
Seeking recovery of those damages,
North Peak in January 2009 filed a
complaint against Architecture plus
and its owners – Mark Fredstrom and
his wife, Audrey – asserting one claim
for breach of implied warranty and
another for negligence. In its breach-
of-implied-warranty claim, North Peak
said it had relied upon the architect’s
“design plans and their implied
representation that such plans were
prepared with the reasonable skill,
care, and diligence of a competent
design professional, in a non-negligent
manner, and in conformance with the
project specifications as provided by
Messrs. Haugen and Scaramella.”
North Peak alleged the architect
had “breached the implied warranty
by providing deficient and substan-
dard workmanship in designing and
orienting the custom home on the [l]
ot without maximizing the views of
the city lights as expressly required.”
North Peak also requested attorneys’
fees, citing an Arizona law providing
that “[i]n any contested action arising
out of a contract, express or implied,
the court may award the successful
party reasonable attorney fees.”) North
Peak also alleged negligence, claiming
the architect fell below the standard of
care when it “failed to orient the cus-
tom residence so to properly provide
the views of the city lights.”
The architect filed a motion to dismiss
the breach-of-implied-warranty claim,
arguing that “the essence of [North
Peak’s] claim is one for negligence”
and that “there is no contractually-
based claim for breach of implied
warranty insofar as design profes-
sionals are concerned.” According to
the architect, North Peak asserted the
implied-warranty claim in an “attempt
to convert an action for which attor-
neys’ fees are not recoverable into one
in which attorneys’ fee[s] are recover-
able.”
The trial court dismissed the breach-
of-implied-warranty claim because it
agreed with the architect’s assertion.
The trial court also dismissed the
negligence claim, citing the eco-
nomic loss doctrine, which Arizona
upholds. (According to the economic
loss doctrine, a design professional
cannot be sued in tort (as for profes-
sional negligence) when the loss is
purely economic; purely economic
losses may be recovered only through
breach-of-contract actions, effectively
limiting such claims to the clients
involved.)
North Peak appealed the ruling to the
Arizona Court of Appeals, stating that
the trial court erred when it dismissed
the breach-of-implied-warranty claim.
(North Peak agreed that dismissal of
the negligence claim was appropriate.)
In rendering its decision, the appellate
court cited
Donnelly Constr. Co. v.
Oberg/Hunt/Gilleland
(139 Ariz. 184,
186, 677 P.2d 1292, 1294 (1984)),
where the state’s supreme court held
that a claim for breach of an implied
warranty may be brought against
a design professional even in the
absence of a contractual relationship.
There, the court recognized that design
professionals give an implied war-
ranty “that they have exercised their
skills with care and diligence and in
a reasonable, non-negligent manner.”
Accordingly, the court held that Don-
nelly was able to go forward with its
breach of implied warranty claim and
its negligence claim.
According to the Arizona Court of
Appeals, “The facts before us are
analogous to Donnelly. North Peak,
alleging it relied to its detriment
on Architect’s faulty design plans,
brought claims for negligence and
breach of implied warranty against
Architect. No privity of contract exists
between North Peak and Architect.
Because Donnelly recognizes that
breach of an implied warranty is a
valid cause of action against a design
professional and can be brought in
addition to a claim for negligence,
we must conclude that the court erred
in dismissing North Peak’s implied
warranty claim….Although we base
our decision on Donnelly, we are
also mindful that our supreme court
has held that a claim for breach of an
implied warranty of habitability and
workmanlike performance sounds in
contract rather than tort….Addition-
ally, we disagree with Architect’s argu-
ment that North Peak cannot assert a
cause of action for breach of implied