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 Wunderlich’s 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 Wunderlich’s on their counterclaim of $297,782. The trial court determined that the Wunderlich’s were the prevailing party and awarded the Wunderlich’s 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).

Therefore, 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.