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Breach of
Contract: Too Late to Sue
The Arizona Court of Appeals affirms the
statutory clock for contract-based claims
When defective construction by a
subcontractor results in a lawsuit against
the general contractor, indemnity provisions
in the contract normally allow the general
to sue the subcontractor. However, as one
general contractor learned the hard way,
indemnity based in contract has time limits,
and a general who fails to meet key
deadlines may forfeit its right to
indemnification.
Evans Withycombe was the general contractor
in the construction of a Scottsdale home
that was finished in January 1992. Eight
years later, in August 2000, the owners of
the home sued Evans Withycombe for defective
construction. Two years after that (August
2002), and just before settling with the
homeowners, Evans Withycombe filed a
third-party complaint against the
subcontractors that worked on the home for
breach of contract, breach of warranty,
negligence, and indemnification.
One of the subs, Western Innovations,
responded with a motion for summary
judgment, based on
A.R.S. § 12-552, which bars
contract-based claims filed more than nine
years after substantial completion of a
construction project. (By statute, the limit
is eight years, but if an injury or latent
defect is discovered during the eighth year,
the statute extends the deadline for an
additional year.) Evans Withycombe’s claim
came approximately ten years after the
certificate of occupancy was issued.
The trial court granted Western’s motion and
dismissed Evans Withycombe’s third-party
complaint in its entirety. Evans Withycombe
appealed, arguing in part that its claims
for negligence and indemnity were not based
in contract.
The Arizona Court of Appeals upheld most,
but not all, of the trial court’s dismissal
of Evans Withycombe’s complaint. The judges
affirmed that A.R.S. § 12-552 clearly
provides that a breach of warranty claim is
based in contract and barred Evans
Withycombe’s ten-year-old claim. The court
also noted that, if Evans Withycombe had
filed its third-party claim against the
subcontractors in a timely fashion, its
claim would have survived the statutory time
limit. (The original lawsuit was filed in
August 2000, giving the general contractor a
five-month window, to January 2001, during
which it could sue its subs in a contract
action.)
In one bit of good news for Evans
Withycombe, the court ruled that, while
A.R.S. § 12-552 barred it from making a
claim based in contract, the statute did not
bar the company’s common law indemnity claim
against its subcontractors. As a
consequence, while upholding most provisions
of the trial court’s dismissal of Evans
Withycombe’s suit, the Court of Appeals
reversed the trial court’s dismissal of the
company’s common law indemnity claim.
For general contractors, the point of this
ruling is a simple one: If an owner sues
you, and you believe the true culprit is a
subcontractor, be sure that you file your
legal action against the subcontractor
before the statutory clock stops ticking.
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