Chapter 7.1 Construction Case Law

• Library: Construction Law Practice Manual 3rd Edition 2016

? ARIZONA’S MOST IMPORTANT CONSTRUCTION LAW APPELLATE DECISIONS 1. A Miner Contracting, Inc. v. Toho-Tolani Cty. Improvement Dist., 233 Ariz. 249, 311 P.3d 1062 (Ct. App. 2013). This matter involves a suit by a contractor against an improvement district. The court of appeals affirmed the trial court’s dismissal of the contractor’s complaint and affirmed the award of damages against contractor and, to a lesser extent, its surety, based on the doctrine of res judicata. The contractor and the surety had failed to participate in an administrative hearing conducted by the Improvement District’s Board of Directors, as authorized by statute, whereupon liability and damages were adjudicated. The doctrine of res judicata precluded the contractor and its surety from contesting the default determination made by the Board at the hearing. 2. AROK Constr. Co. v. Indian Constr. Services, 174 Ariz. 291, 848 P.2d 870 (Ct. App. 1993). This case holds that even when some terms of an oral contract are missing or uncertain, as long as such terms can be established through extrinsic evidence, for example, by past course of dealing, the contract may be deemed to be sufficiently certain to be enforceable. Public policy favors enforcement of contracts when it is clear that the parties intended themselves to be bound. 3. Brown Wholesale Elec. Co. v. Beztak of Scottsdale, 163 Ariz. 340, 788 P.2d 73 (1990). This decision adopts, but then qualifies, the Joint Check Rule, which creates the presumption that a subcontractor’s materialman has received all sums owed to him if he endorses the joint check. 4. Chaney Bldg. Co. v. City of Tucson, 148 Ariz. 571, 716 P.2d 28 (1986). This case holds that an owner impliedly warrants that the plans he provides to his contractor are accurate and sufficient to build the project, and that the contractor is not liable for damages which are the direct result of the defective plans and specifications furnished by the owner. 5. Commercial Cornice & Millwork, Inc. v. Camel Constr. Serv. Corp., 154 Ariz. 34, 739 P.2d 1351 (Ct. App.1987). This decision addresses the dual, primary purposes of the mechanics’ lien laws and discusses the issue of noncompliance with the technical requirements of those laws. 6. Crowe v. Hickman’s Egg Ranch, Inc., 202 Ariz. 113, 41 P.3d 651 (Ct. App. 2002). This decision addresses the doctrine of substantial compliance in reference to a contractor’s satisfaction of the State licensing requirements for contractors. 7. Deer Valley Unified Sch. Dist. v. Houser, 214 Ariz. 293, 152 P.3d 490 (2007). This case discusses the technical requirements of Arizona’s Administrative Claim Act, A.R.S. § 12-821.01. 8. Dodge v. Fid. & Deposit Co. of Maryland, 161 Ariz. 344, 778 P.2d 1240 (1989). This decision holds that an obligee on a performance bond may maintain a tort action against a surety for breach of the surety’s duty to act in good faith in responding to a claim. 9. Dominguez v. Meritage Homes Arizona, Inc., 2012 WL 3362196 (Ct. App. 2012). This memorandum decision, the precedential use of which is governed now by Rule 111(c), Ariz. R. Sup. Ct., involved a suit by a homeowner against a builder on numerous tort and contract theories. At issue on appeal was the matter of attorneys’ fees. The trial court had refused to award attorneys’ fees to the successful home builder even though the court had found the home builder to be the prevailing party. The parties’ construction contract contained a unilateral, mandatory fee provision. The court of appeals ruled that the discretion afforded a trial judge under § 12-341.01 did not extend to a contractual fee provision. More significantly, the court of appeals had no qualms with the fact that the attorneys’ fee provision was unilateral. 10. Donnelly Constr. Co. v. Oberg/Hung/Gilleland, 139 Ariz. 184, 677 P.2d 1292 (1984). This decision holds that design professionals have a duty to use ordinary skill, care, and diligence in rendering their professional services, and that that duty extends to the contractor on a construction job. Should the design professional breach that duty to provide plans and specifications that are sufficient and adequate for the job, the contractor who relies on bad plans and suffers economic loss, may recover?in negligence, negligent misrepresentation, and breach of implied warranty?from the architect of the defective plans. 11. 1800 Ocotillo, LLC v. The WLB Group, Inc., 219 Ariz. 200, 196 P.3d 222 (2008). This decision enforced a design professional’s contractual limitation of liability provision limiting the amount of damages for his negligence to the amount of the fee paid him for his services. 12. Fairway Builders, Inc. v. Malouf Towers Rental Co., Inc., 124 Ariz. 242, 603 P.2d 513 (Ct. App. 1979). This decision addresses the doctrine of economic waste, as well as the obligation of damage mitigation. 13. Flagstaff Affordable Housing Ltd. P’ship v. Design Alliance, Inc., 223 Ariz. 320, 273 P.3d 664 (2010). This decision holds that the economic loss rule precludes tort recovery of economic losses in the construction defect setting where a contract exists between the parties. 14. Hall v. Read Dev., Inc., 229 Ariz. 277, 274 P.3d 1211 (Ct. App. 2012). In a suit for rescission by a subsequent homeowner against the builder, the court of appeals ruled that privity of contract remained a requirement for the equitable remedy of rescission, even though privity is no longer an obstacle to a claim for damages by a subsequent homeowner, under the contract theory of breach of the implied warranty of habitability. The court also construed A.R.S. § 12-341.01(A), ruling that “a judgment finally obtained,” as used in...