Court Reaffirms Contract Requirement in Implied Warranty Breach

Louis Yanni was one of several people who bought homes in the same subdivision. When Mr. Yanni and his neighbors determined that the plumbing in their homes was defective, they sued the two plumbing contractors that, pursuant to subcontracts with the general contractor, performed the plumbing work on the homes as part of the original construction. The homeowners’ suit alleged that the subcontractors had breached the implied warranty of workmanship and habitability by using defective plumbing components.

In seeking to dismiss the suit, the subcontractors argued that:

• the homeowners’ contracts were with the general contractor and not the subcontractors;

• only parties to contracts can bring claims for breach of the implied warranty; and, thus,

• the homeowners did not have standing to sue them.
  

The trial court agreed with the subcontractors and dismissed the homeowners’ suit. The homeowners appealed, and the Arizona Court of Appeals affirmed the trial court’s dismissal of their lawsuit and the victory by the subcontractors ( see the ruling in Yanni v. Tucker Plumbing ).

Related Articles:

• Duty to Perform Good Workmanship Extends Beyond Parties to Contract
• Architect's Errors May Create Liability for a Contractor's Damages

Contract Requirement. This case offers an opportunity to review the doctrine of implied warranty of workmanship and habitability, which was first applied to Arizona residential construction in a 1979 case, Columbia Western Corp. v. Vela. In that case, the court held that, in new home construction, the “builder-vendor impliedly warrants that the construction was done in a workmanlike manner and that the structure is habitable.” Because an implied warranty claim “sounds in contract,” the Columbia court held that only the parties to the contract can enforce it.

Five years later, the Arizona Supreme Court created a narrow exception, in Richards v. Powercraft, that allows subsequent homebuyers (not just the first buyer) to sue a homebuilder for breach of implied warranty.

A similar exception came out of a 2008 case, The Lofts at Fillmore v. Reliance Commercial Construction ( see related article ), in which the Arizona Supreme Court ruled that a general contractor was responsible for defects in a condo project in which the buyers contracted with the developer, not the general contractor.

In Yanni , the homeowners raised both exceptions to support their claim against the plumbing subcontractors but were unsuccessful. The Court of Appeals noted that “nothing in Richards or Lofts [allows] a homebuyer to assert a breach of the implied warranty against any subcontractor ... in the absence of a contract between the homebuyer and the subcontractor.”

Subcontractors at Risk. It is worth mentioning that neither the trial court’s dismissal of the homeowners’ suit nor the appellate court’s ruling let the subcontractors entirely off the hook.

• The trial court noted that there were other “defendants in line,” such as the general contractor or developer, with which the homeowners did have a contract and against which the homeowners’ could have filed suit.

• Similarly, the appellate court included in its opinion that the homeowners could sue the developer or general contractor, which could then seek indemnity against the subs or assign its claim to the homeowners.