Zambrano v. M and Rc II ( 2021 )

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE
TINA ZAMBRANO, Plaintiff/Appellant,
v.
M & RC II LLC, et al., Defendants/Appellees.
No. 1 CA-CV 19-0635
FILED 7-29-2021
Appeal from the Superior Court in Maricopa County
No. CV2017-008174
The Honorable Danielle J. Viola, Judge
REVERSED AND REMANDED
COUNSEL
Vial Fotheringham, LLP, Tempe
By Darrien Shuquem
Counsel for Plaintiff/Appellant
Stinson LLP, Phoenix
By James E. Holland, Jr., Michael Vincent
Counsel for Defendants/Appellees
Kasden LippSmith Weber Turner, LLP, Phoenix
By Kenneth S. Kasden, Scott A. Booth, Michael J. White
Counsel for Amicus Curiae Concerned Consumers of Magma Ranch
Jones, Skelton & Hochuli, P.L.C., Phoenix
By Robert R. Berk, Eileen Dennis GilBride
Counsel for Amicus Curiae Leading Builders of America
OPINION
Judge David B. Gass delivered the opinion of the Court, in which Presiding
Judge Jennifer M. Perkins and Judge Michael J. Brown joined.
G A S S, Judge:
¶1 Tina Zambrano appeals the superior court’s grant of
summary judgment to M & RC II, LLC, and Scott Homes Development
Company (Scott Homes, collectively). Zambrano argues a buyer cannot
waive—and a builder cannot disclaim—the implied warranty of
workmanship and habitability, even if the builder provides the buyer an
express warranty. We agree and reverse.
FACTUAL AND PROCEDURAL HISTORY
¶2 Zambrano signed a purchase agreement with M & RC to buy
a newly built home for herself. The agreement was six pages long.
Paragraph 15 of the agreement read as follows:
15. SELLER’S LIMITED WARRANTY.
(a) At Closing, Seller [M & RC] shall issue a “Home Builder’s
Limited Warranty” to Buyer, a sample of which has been
provided to Buyer prior to the execution of this Contract. The
Home Builder’s Warranty is the only warranty applicable to
the purchase of the Property.
Zambrano initialed paragraph 15. Immediately below her initials and as
part of paragraph 15, the agreement reiterated:
THE HOME BUILDER’S LIMITED WARRANTY
REFERENCED ABOVE IS THE ONLY WARRANTY
APPLICABLE TO THE PURCHASE OF THE PROPERTY.
ALL OTHER EXPRESS OR IMPLIED WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, HABITABILITY AND WORKMANSHIP ARE
2
ZAMBRANO v. M & RC II, et al.,
Opinion of the Court
HEREBY DISCLAIMED BY SELLER AND ITS
AFFILIATES AND WAIVED BY BUYER, ANY IMPLIED
WARRANTY THAT MAY EXIST DE[S]PITE THE ABOVE
DISCLAIMER IS HEREBY LIMITED TO A ONE (1) YEAR
PERIOD.
Zambrano also initialed paragraph 32 in which she confirmed she
had read and understood the agreement’s terms.
¶3 The separate, forty-page express warranty’s cover page also
specifically disclaimed any implied warranties, saying:
WE make no housing merchant implied warranty of
habitability or any other warranties, express or implied, in
connection with the sales contract or the warrantied HOME,
and all such warranties are excluded, except as expressly
provided in this BUILDER’S LIMITED WARRANTY. There
are no warranties which extend beyond the face of this
BUILDER’S LIMITED WARRANTY.
¶4 Zambrano sued, asserting breach of contract and breach of the
implied warranty of habitability and workmanship. Zambrano alleged
construction defects including popped nails in the drywall and defects
affecting her home’s foundation, such as soil preparation, grading, and
drainage.
¶5 Scott Homes moved for summary judgment, arguing Scott
Homes disclaimed—and Zambrano waived—all implied warranties. The
superior court granted Scott Homes’s motion. The parties stipulated to
dismiss the breach-of-contract claim against M & RC.
¶6 Zambrano timely appealed. This court has jurisdiction under
article VI, section 9, of the Arizona Constitution, and A.R.S. § 12-2101.A.1.
ANALYSIS
¶7 Summary judgment is appropriate when “no genuine dispute
as to any material fact” exists and “the moving party is entitled to judgment
as a matter of law.” Ariz. R. Civ. P. 56(a); see also Orme Sch. v. Reeves, 166
Ariz. 301, 305 (1990). This court reviews a superior court’s grant of
summary judgment de novo, viewing the facts in the light most favorable to
the non-movant. See KB Home Tucson, Inc. v. Charter Oak Fire Ins. Co., 236
Ariz. 326, 329, ¶ 14 (App. 2014).
3
ZAMBRANO v. M & RC II, et al.,
Opinion of the Court
¶8 Zambrano argues Arizona law unequivocally precludes a
waiver or disclaimer of the implied warranty of workmanship and
habitability. To resolve this issue, we must weigh the public policy
underlying the implied warranty of habitability and workmanship against
the interest in enforcing a freely negotiated waiver. See 1800 Ocotillo, LLC,
v. WLB Group, Inc., 219 Ariz. 200, 202, ¶ 8 (2008).
¶9 In 1979, Arizona judicially eliminated the caveat emptor rule
for newly built homes. Columbia Western Corp. v. Vela, 122 Ariz. 28, 32–33
(App. 1979). In Columbia Western, this court explained its reasoning:
The caveat emptor rule as applied to new houses is an
anachronism patently out of harmony with modern home
buying practices. It does a disservice not only to the ordinary
prudent purchaser but to the industry itself by lending
encouragement to the unscrupulous, fly-by-night operator
and purveyor of shoddy work.
Id. at 32 (quoting Humber v. Morton, 426 S.W.2d 554, 562 (Tex. 1968)). In its
place, this court imposed the implied warranty of workmanship and
habitability into every new home construction contract. Id. at 33. The
implied warranty encompasses the proper design, preparation, and
construction of a home. See Woodward v. Chirco Constr. Co., 141 Ariz. 514,
516 (1984) (citing Cosmopolitan Homes, Inc. v. Weller, 663 P.2d 1041, 1045
(Colo. 1983)).
¶10 In the decades since Columbia Western, Arizona courts have
consistently enforced the implied warranty and expanded it. See Richards v.
Powercraft Homes Inc., 139 Ariz. 242, 245 (1984) (holding subsequent buyer
may enforce implied warranty given by a builder/seller); Lofts at Fillmore
Condo. Ass’n v. Reliance Com. Constr., Inc., 218 Ariz. 574, 577–78, ¶¶ 15–19
(2008) (holding initial buyer may enforce implied warranty against builder
that was not party to the original sales contract); Sirrah Enters., LLC v.
Wunderlich, 242 Ariz. 542, 544–45, ¶¶ 8–12 (2017) (recognizing implied
warranty is a contract right). A builder cannot rely on a disclaimer of the
implied warranty, standing alone, to avoid the implied warranty. Buchanan
v. Scottsdale Env’t Constr. and Dev., Inc., 163 Ariz. 285, 286–87 (App. 1989).
The same is true when a subsequent purchaser seeks to enforce the implied
warranty. Nastri v. Wood Bros. Homes, Inc., 142 Ariz. 439, 441 (App. 1984)
(citing Richards, 139 Ariz. at 245), rejected on other grounds by Flagstaff
Affordable Hous. Ltd. P’ship v. Design All., Inc., 223 Ariz. 320, 325, ¶ 23 (2010).
4
ZAMBRANO v. M & RC II, et al.,
Opinion of the Court
¶11 “[A]bsent legislation specifying that a contractual term is
unenforceable,” this court looks to public policy to judge the term’s validity.
1800 Ocotillo, 219 Ariz. at 202, ¶ 8. Arizona’s public policy flows from “its
constitution, legislative acts, and when the legislature has not spoken,
[from] its judicial decisions.” Nastri, 142 Ariz. at 442. The implied
warranty’s overarching goal is to “protect innocent purchasers and hold
builders accountable for their work.” Richards, 139 Ariz. at 245 (quoting
Moxley v. Laramie Builders, Inc., 600 P.2d 733, 736 (Wyo. 1979)).
¶12 The public policy underlying the implied warranty does not
exist in a vacuum. Arizona also has a public policy of allowing parties to
contract freely without interference. “Society [] broadly benefits from the
prospect that bargains struck between competent parties will be enforced.”
1800 Ocotillo, 219 Ariz. at 202, ¶ 8 (citing Restatement (Second) of Contracts
§ 178 cmt. b); see also Lassen v. Benton, 86 Ariz. 323, 327 (1959) (“[T]he usual
and most important function of courts of justice is rather to maintain and
enforce contracts than to enable parties thereto to escape their obligation on
the pretext of public policy, unless it clearly appears that they [contravene]
public right or the public welfare.” (quoting Granger v. Craven, 199 N.W. 10,
11 (Minn. 1924))). Accordingly, Arizona courts decline to enforce a contract
term on public policy grounds “only when the term is contrary to an
otherwise identifiable public policy that clearly outweighs any interests in
the term’s enforcement.” 1800 Ocotillo, 219 Ariz. at 202, ¶ 8 (citation
omitted).
¶13 In weighing the two, Scott Homes’s argument does not give
appropriate weight to the public policy underlying the warranty. Our
supreme court has recognized the important reasons undergirding
Columbia Western’s purchaser-protection, including “that house-building is
frequently undertaken on a large scale, that builders hold themselves out
as skilled in the profession, that modern construction is complex and
regulated by many governmental codes, and that homebuyers are generally
not skilled or knowledgeable in construction, plumbing, or electrical
requirements and practices.” Richards, 139 Ariz. at 245; see also Lofts at
Fillmore Condo. Ass’n, 218 Ariz. at 576–77, ¶¶ 9–12 (discussing the well-
established policy considerations in Columbia Western and its progeny).
¶14 Further, Scott Homes reads 1800 Ocotillo’s freedom-of-
contract language too broadly. In that case, the supreme court enforced a
contractual liability limitation between a builder and a surveying and
engineering firm. 219 Ariz. at 201, ¶¶ 1–2. The supreme court said the
liability-limitation term was not contrary to an identified public policy that
clearly outweighs interest in its enforcement. Id. at 204, ¶ 21. But in that
5
ZAMBRANO v. M & RC II, et al.,
Opinion of the Court
case, the supreme court could not identify a governing public policy
interest at all—let alone one weighing against enforcement. Id. at 202–04,
¶¶ 9–21. Further, that case involved a professional services contract
between two companies—not a contract between a builder and an end-
buyer of a home who planned to live in what the builder constructed. Id. at
201, ¶ 2. Here, long-standing public policy reasons support the judicially
created, implied warranty that protects home buyers such as Zambrano.
¶15 We recognize a trend in some states to allow waivers of the
implied warranty. See, e.g., Turner v. Westhampton Ct., L.L.C., 903 So. 2d 82,
92–93 (Ala. 2004) (express warranty offered in consideration sufficient to
waive all other warranties); Bass v. Pinnacle Custom Homes, Inc., 592 S.E.2d
606, 607–08 (N.C. Ct. App. 2004) (express warranty given with clause
disclaiming “all other warranties” sufficient to waive implied warranties);
Kirkman v. Parex, Inc., 632 S.E.2d 854, 858 (S.C. 2006) (disclaimer only valid
if “(1) conspicuous, (2) known to the buyer, and (3) specifically bargained
for.”(quoting Burbo v. Harley C. Douglass, Inc., 106 P.3d 258, 263 (Wash. Ct.
App. 2005))). Other states, however, have rejected this trend, recognizing
enforcement of a “disclaimer of a warranty protecting a purchaser from the
consequences of latent defects would defeat the very purpose of the
warranty.” Davencourt at Pilgrims Landing Homeowners Ass’n v. Davencourt
at Pilgrims Landing, LC, 221 P.3d 234, 252–53, ¶ 58 (Utah 2009); see also Jones
v. Centex Homes, 967 N.E.2d 1199, 1202, ¶ 14 (Ohio 2012); Gym-N-I
Playgrounds, Inc. v. Snider, 220 S.W.3d 905, 913 n.11 (Tex. 2007) (recognizing
statutes prohibiting parties from contractually waiving or modifying the
implied warranty of habitability).
¶16 As we study the scales, we conclude the public policy
supporting the implied warranty clearly outweighs the freedom-of-contract
interest in the waiver’s enforcement. A new home buyer cannot waive—
and a builder cannot disclaim—the implied warranty of workmanship and
habitability. This prohibition precludes a waiver even when, as here, the
builder gives an express warranty in consideration for the waiver.
¶17 Arizona may one day change course and allow for an
implied-warranty waiver or disclaimer. But we cannot chart that new
direction without further guidance from our supreme court. Until then,
Arizona courts will continue to prohibit such waivers and disclaimers as
some states continue to do. See, e.g., Davencourt at Pilgrims Landing, 221 P.3d
at 252–53, ¶ 58.
6
ZAMBRANO v. M & RC II, et al.,
Opinion of the Court
ATTORNEY FEES AND COSTS ON APPEAL
¶18 Zambrano requests her reasonable attorney fees associated
with this appeal under A.R.S. § 12-341.01. We grant her request as the
prevailing party and award her reasonable attorney fees and costs upon
compliance with ARCAP 21.
CONCLUSION
¶19 We reverse the superior court’s summary judgment. We
remand the case to the superior court for consideration of Zambrano’s
pending claims.
AMY M. WOOD • Clerk of the Court
FILED: AA
7