Barnes v. Mac Brown and Company, Inc.

342 N.E.2d 619, 264 Ind. 227, 1976 Ind. LEXIS 450

• Court: Indiana Supreme Court
• Decided: February 25, 1976
• Docket: 276S53
• Status: Published

Opinions

Arterburn, J.

This case comes before this court on Petition to Transfer from the Court of Appeals. Oral argument was heard on Tuesday, November 25,1975. We grant transfer and vacate the judgment of the Court of Appeals. The judgment of the trial court below is reversed.

William L. Barnes and June Barnes are appealing the trial court’s granting of a motion to dismiss submitted by the Appellee, Mac Brown and Company, Inc. The pleadings in this case reveal that in 1967 or 1968 the Appellee built and sold a dwelling house to John and Mary Shipman. The Ship-mans sold this house to the Appellants in October, 1971. After moving into the house the Appellants discovered that the basement leaked and that there was a large crack around three of the basement walls. Repair of the basement walls cost them $3500.

The Appellant filed a two-count complaint. Count One charged the Appellee with breach of implied warranty and the other alleged fraudulent concealment on the part of the Shipmans. The Appellee filed a motion to dismiss pursuant to Ind. R. Tr. P. 12(B) (6) which was granted by the trial court, from which this appeal results.

The issue before us is whether the builder-vendor’s implied warranty of fitness for habitation extends to second or subsequent purchasers of the dwelling house when a latent defect later appears. Theis v. Heuer, (1971) 149 Ind. App. 52, 270 N.E.2d 764, transfer granted and opinion adopted, (1972) 280 N.E.2d 300, abolished caveat emptor between a builder-vendor and a first purchaser of a dwelling house and found that an implied warranty of fitness for habitation exists between those parties. The facts of that case did not present the court with a question of subsequent purchasers and that question has remained unanswered until this appeal.

In J. I. Case Co. v. Sandefur, (1964) 245 Ind. 218, 197 N.E.2d 519, this court briefly discussed the diminishing role played by the requirement of privity of contract in the development of products liability law. In holding that the purchaser of used farm machinery was not precluded from suing its manufacturer we wrote at 245 Ind. 222:

“As stated by the leading authorities, public policy has compelled this gradual change in the common law because of the industrial age where there is no longer the usual privity of contract between the user and the maker of a manufactured machine. On the other hand, there must be reasonable freedom and protection for the manufacturer. He is not an insurer against accident and is not obligated to produce only accident-proof machines. The emphasis is on the duty to avoid hidden defects or concealed dangers. Campo v. Scofield (1950), 301 N.Y. 468, 95 N.E.2d 802.”

The logic which compelled this change in the law of personal property is equally persuasive in the area of real property. Our society is an increasingly mobile one. Our technology is increasingly complex. The traditional requirement of privity between a builder-vendor and a purchaser is an outmoded one. The facts of Theis v. Heuer, supra, did not require us to extend a builder-vendor’s implied warranty of fitness for habitation beyond the first purchaser. We do so now.

As with our treatment of the sale of personal property, the manufacturer of a home must be accorded reasonable freedom and protection. This extension of liability is limited to latent defects, not discoverable by a subsequent purchaser’s reasonable inspection, manifesting themselves after the purchase. The standard to be applied in determining whether or not there has been a breach of warranty is one of reasonableness in light of surrounding circumstances. The age of a home, its maintenance, the use to which it has been put, are but a few factors entering into this factual determination at trial.

The contention that a distinction should be drawn between mere “economic loss” and personal injury is without merit. Why there should be a difference between an economic loss resulting from injury to property and an economic loss resulting from personal injury has not been revealed to us. When one is personally injured from a defect, he recovers mainly for his economic loss. Similarly, if a wife loses a husband because of injury resulting from a defect in construction, the measure of damages is totally economic loss. We fail to see any rational reason for such a distinction.

If there is a defect in a stairway and the purchaser repairs the defect and suffers an economic loss, should he fail to recover because he did not wait until he or some member of his family fell down the stairs and broke his neck? Does the law penalize those who are alert and prevent injury? Should it not put those who prevent personal injury on the same level as those who fail to anticipate it ?

Finally, we again observe that the defect in question must be latent or hidden. The burden is upon the claimant to show that the defect had its origin and cause in the original builder-seller.

To the extent discussed above, we do not see that the sale of real estate should be treated differently from the sale of personal property. The judgment of the trial court dismissing the Appellants’ suit for failure to state a cause of action is accordingly reversed, and the trial court is directed to reinstate the action.

Givan, C.J., Hunter, J., concur; DeBruler, J., dissents with opinion in which Prentice, J., concurs.