Attorney Fees Are Now Recoverable in a Breach of Warranty Claim Against a Contractor by Subsequent Homeowners
Now that subsequent purchasers can recover their
attorney fees should they prevail, that may lead to an increase in subsequent
purchasers joining in multi-plaintiff construction defect lawsuits.
The Wunderlichs contracted with Sirrah Enterprises to
"build a basement through exterior walls" at the Wunderlichs' home. Sirrah
performed the work and was partially paid, but the Wunderlichs refused to make
full payment, claiming construction defects. Sirrah sued in Arizona Superior
Court for the unpaid contract amount. The Wunderlichs countersued, claiming
breach of the implied warranty of workmanship and habitability ("implied
warranty"). The jury found in favor of Sirrah on its claim of $31,374 and in
favor of the Wunderlichs on their counterclaim of $297,782. The trial court
determined that the Wunderlichs were the prevailing party and awarded the
Wunderlichs their attorney fees. Sirrah appealed.
The Arizona Supreme Court noted that, under the implied
warranty, a residential builder warrants that its work was performed in a
workmanlike manner and that the structure is habitable. The Supreme Court then
held that the implied warranty is a term imputed into an express contract (read
into a contract even if not expressly written into the contract) and can be
enforced by subsequent homeowners (not just the original home purchaser).
A.R.S. § 12-341.01
authorized an award of attorney fees to the successful party in a lawsuit for
breach of the implied warranty because the claim arises out of an express
contract. This case marks a change in the law as to subsequent purchasers.
An unintended consequence of the Wunderlich case is
that, now that subsequent purchasers can recover their attorney fees should they
prevail, it may lead to an increase in subsequent purchasers joining in
multi-plaintiff construction defect lawsuits.