Sullivan v. Pulte: Court Bars Negligence Claim Against Builder by Subsequent Home Buyer
Subsequent purchasers are limited to recourse for construction defects under an implied warranty theory, which has a shorter limitations period than negligence claims.
In July 2015, the Court of Appeals made a favorable
ruling for contractors in
Sullivan v. Pulte
when it held that a subsequent
(i.e., non-original) homeowner cannot maintain a negligence claim
against a homebuilder for construction defects.
The story began in 2003, when Mr. & Mrs. Sullivan bought a three-year-old Pulte home from the original owner. Six years later, in 2009, the Sullivans discovered defects in the retaining wall and asked Pulte to repair them. Pulte declined to make the repairs, claiming that it was not responsible for defects in a home of that age. The Sullivans sued Pulte for damages for fraud and misrepresentation, for breaches of implied warranty, and for negligence.
The trial judge dismissed the Sullivans
lawsuit, ruling that:
because the Sullivans never had a
contract or dealt directly with Pulte, they had no claim for fraud or
the eight-year limit imposed by
Arizonas statute of repose had expired, depriving the Sullivans of
their implied warranty claim; and
economic loss rule barred
the Sullivans negligence claim.
The Sullivans appealed, and the Arizona Court
of Appeals upheld the dismissal of their fraud and implied warranty
However, the Court ruled that, because the
Sullivans did not have a contract with Pulte, the economic loss rule did
not bar the Sullivans negligence claim. Pulte appealed that issue to
the Arizona Supreme Court, which agreed with the Court of Appeals and
remanded the negligence claim to Superior Court.
Back in Superior Court, Pulte again moved to
dismiss the Sullivans negligence claim, this time arguing that Pulte
owed no duty of care to a subsequent home purchaser (such as the
Sullivans) to protect them from economic harm. Again the trial court
dismissed the Sullivans negligence claim, and again they appealed.
In their second appeal, the Sullivans argued
that Pultes duty of care arose from building codes and from the
statutes that empower the Arizona Registrar of Contractors to discipline
a contractor for workmanship violations. The Court of Appeals did not
buy that argument, holding that those regulations were too broad to
impose a specific duty of care on builders, and upheld the trial courts
dismissal of the negligence claim.
In the end, after two trial court proceedings
and three appeals over five years, the net result was no different than
the trial courts original dismissal of all of the Sullivans claims
(although the negligence claim was dismissed, not based on the economic
loss rule, but because Pulte owed no duty of care to the Sullivans).
A Win for Contractors
The outcome is good news for builders and other
contractors, because negligence claims are governed by the discovery
rule, which allows a claimant to file suit within two years of
discovery of the defect. Had the courts allowed the discovery rule to
apply to claims such as the Sullivans, a non-original homeowner would
be able to sue over a defect even if that defect was discovered decades
Under the Sullivan ruling, subsequent purchasers are now limited to recourse for construction defect claims under an implied warranty theory, which has a limitations period of eight to nine years, regardless of when the alleged defect is discovered. Keep in mind, however, that claims for non-economic injury (i.e., injury to property or person)
are not covered by this limitation and can still be the subject of negligence or other tort claims.