Evans Withycombe, Inc. v. Western Innovations, Inc. – 11/14/2006

November 17, 2006

Arizona Court of Appeals Division One Holds That Statute of Repose Bars Contractor’s Contract-Based Claims Against Its Subcontractors, But Not Contractor’s Common Law Indemnity Claims Against Its Subcontractors.

Homeowners purchased a home, and Evans Withycombe (“Evans”) was the general contractor on the home. Various subcontractors also worked on the home pursuant to subcontracts with Evans, including Western Innovations, Inc. (“Western”) and Construction Inspection & Testing Co. (“CIT”). The homeowners received a certificate of occupancy from the city of Scottsdale in 1992, and more than eight years later, sued Evans for defective construction. More than two years after that, Evans filed a third-party complaint against Western and CIT, its subcontractors.

Western filed a motion for summary judgment to dismiss Evans’ third-party complaint, basing the motion on A.R.S. § 12-552, which barred all claims arising out of contract filed more than nine years after substantial completion of a home. The trial court granted the motion, and dismissed the third-party claim in its entirety.

The court of appeals affirmed in part, reversed in part, and remanded for further proceedings. The court held that the plain language of the statute bars actions “based in contract” or “based on implied warranty arising out of the contract,” and thus found that the trial court did not err in dismissing Evans’ contract and warranty claims. A.R.S. § 12-552(A),(C). After distinguishing contractual indemnity from common-law indemnity, the court held that the statute of repose bars only the contractual indemnity claim. For various reasons, the court declined to consider whether the statute of repose bars negligence claims.

Judge Snow wrote the opinion; Judge Ehrlich, Presiding Judge, and Judge Gemmill concurred.