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Hayden Business Center Condominiums Association v. Pegasus Development Corp.1/25/2005
Hayden Business Center Condominiums Association (the Association) appeals the grant of summary judgment on its claim for breach of the implied warranty of good workmanship and challenges the trial court's denial of its motion to amend the complaint. We have jurisdiction and affirm.
FACTUAL AND PROCEDURAL BACKGROUND
Hayden Airpark Venture, L.L.C. (HAV) developed and built the Hayden Business Center, a commercial building in Scottsdale. Pegasus Development Corporation (Pegasus) performed construction-related services for HAV in exchange for a flat monthly fee. The parties dispute whether Pegasus was a general contractor or a construction manager for HAV.
HAV sold condominium interests in the Hayden Business Center to various persons who now claim that the building contained construction defects. These buyers assigned their claims to the Association. The Association then sued HAV and Pegasus for breach of the implied warranty of good workmanship.
Pegasus successfully moved for summary judgment. The trial court acknowledged that a fact question existed as to whether Pegasus served as a general contractor or a construction manager. If Pegasus were a construction manager, there could be no implied warranty of good workmanship that could run to subsequent purchasers. The trial court determined that even if Pegasus had been the general contractor, the Association's claim still failed because no Arizona authority extends the implied warranty of good workmanship to claims by subsequent purchasers of commercial property.
The trial court also considered whether the Association could bring a tort claim. In a pleading, the Association conceded that it had no tort claim because the bulk of its damages consisted of expenses to remedy and repair defective work. Applying the economic loss rule, the trial court concluded that the Association was barred from recovering under a tort theory.
After the grant of summary judgment, the Association moved to amend the complaint to add a negligence count and re-characterized some of its repair costs as property damage. The trial court denied the Association's motion to amend, and entered a Rule 54(b) judgment in favor of Pegasus. This appeal followed.
DISCUSSION
A. As a Matter of Law, the Association Has No Implied Warranty Claim Against Pegasus
This court reviews a grant of summary judgment de novo. Great Am. Mortgage, Inc. v. Statewide Ins. Co., 189 Ariz. 123, 125, 938 P.2d 1124, 1126 (App. 1997). We view the facts and the evidence in the light most favorable to the non-moving party, drawing all reasonable inferences in favor of that party. AROK Constr. Co. v. Indian Constr. Svcs., 174 Ariz. 291, 293, 848 P.2d 870, 872 (App. 1993).
1. Arizona Law Does Not Support Extending the Claim Beyond the Home-Building Context
An implied warranty of good workmanship claim is a contract claim, and it has long been the law that only parties to a contract may maintain an action on it. Treadway v. Western Cotton Oil & Ginning Co., 40 Ariz. 125, 138, 10 P.2d 371, 375 (1932); Leal v. Allstate Ins. Co., 199 Ariz. 250, 254, 21, 17 P.3d 95, 99 (App. 2000)(stranger to an insurance contract could not sue the insurer in tort for a bad faith breach); Stratton v. Inspiration Consolidated Copper Co., 140 Ariz. 528, 531, 683 P.2d 327, 330 (App. 1984)(as a matter of law, a subcontractor could not sue the owner absent privity of contract). Exceptions exist, as in the case when the contracting parties specify a non-party as the intended beneficiary. See Sherman v. First Am. Title Ins. Co., 201 Ariz. 564, 567, 6, 38 P.3d 1229, 1232 (App. 200
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