Melody Home Manufacturing Co. v. Barnes

741 S.W.2d 349, 72 A.L.R. 4th 259, 31 Tex. Sup. Ct. J. 47, 1987 Tex. LEXIS 409, 1987 WL 1277

• Court: Texas Supreme Court
• Decided: November 4, 1987
• Docket: C-5508
• Status: Published

Opinions

ON MOTION FOR REHEARING

SPEARS, Justice.

The court’s opinion of June 17, 1987 is withdrawn and the following is substituted therefor.

This is a Deceptive Trade Practices-Consumer Protection Act (DTPA) implied warranty case. Lonnie and Donna Barnes sued Melody Home Manufacturing Company under the DTPA for breach of an implied warranty that repairs would be done in a good and workmanlike manner and for other DTPA violations. The jury found that Melody Home knowingly breached this implied warranty and awarded discretionary damages. The trial court rendered judgment for the Barneses and the court of appeals affirmed the judgment of the trial court. 708 S.W.2d 600. We affirm the judgment of the court of appeals.

In 1979, the Barneses ordered a modular pre-fabricated home from Melody Home. Their home was delivered in May 1980. After the Barneses moved in, they continually experienced puddles and dampness inside the house. Over two years after moving in, they discovered that a sink was not connected to the drain in one of the interior walls.

The continual leak caused severe damage to the home’s sheetrock, insulation, and flooring. The Barneses told Melody Home about the problem. Workmen from Melody Home came out twice, but their efforts were unsatisfactory, and additional damages were caused by the repair. The workmen cut and tore linoleum while attempting to repair the home. Moreover, they failed to reconnect the washing machine drain, causing the house to flood with resulting damage to the floors, cabinets, and carpeting.

The Barneses then filed this DTPA implied warranty suit against Melody Home. The jury found that Melody Home failed to construct the home in a good and workmanlike manner. The jury further found that Melody Home breached its implied warranty to repair in a good and workmanlike manner and that this breach was knowing. Based on its finding that Melody Home knowingly breached the implied warranty, the jury awarded $5,000 in discretionary damages under Tex.Bus. & Coiñ. Code Ann. § 17.50(b)(1) (Vernon Supp. 1987).

Melody Home appealed the award of DTPA discretionary damages. The court of appeals held that the sale of a service carries with it the implied warranty that the service will be performed in a skillful and workmanlike manner and affirmed the judgment of the trial court.

Melody Home first challenges the Barneses’ status as consumers with regard to the repairs. DTPA plaintiffs must qualify as consumers, as that term is defined in Tex.Bus. & Com.Code Ann. § 17.45(4) (Vernon Supp.1987),¹ to maintain a private cause of action under section 17.50 of the Act. Flennikeh v. Longview Bank & Trust Co., 661 S.W.2d 705, 706 (Tex.1983). We have recognized at least two requirements to establish DTPA consumer status. First, the plaintiffs must have sought or acquired goods or services by purchase or lease. Sherman Simon Enter., Inc. v. Lorac Service Corp., 724 S.W.2d 13, 15 (Tex. 1987); Cameron v. Terrell & Garrett , Inc., 618 S.W.2d 535, 539 (Tex.1981). Second, the goods or services purchased or leased must form the basis of the complaint. Sherman Simon Enter., Inc., 724 S.W.2d at 15; Cameron, 618 S.W.2d at 539.

It is uncontroverted that the Barneses purchased goods and thus were “consumers” when they originally bought the home. Melody Home’s attempts to repair the defects in the home were, by definition, “services” under the DTPA. Section 17.45(2) defines “services” as “work, labor or service purchased ... for use including services furnished in connection with the sale or repair of goods.” (emphasis added). Melody Home argues that the Barneses were not “consumers” with regard to the repair services because they did not purchase them with cash. See, e.g., Exxon Corp. v. Dunn, 581 S.W.2d 500 (Tex.Civ.App.—Dallas 1979, no writ). The absence of a cash transfer is not determinative because DTPA plaintiffs establish their standing as consumers in terms of their relationship to a transaction, not by their contractual relationship with the defendant. Flenniken, 661 S.W.2d at 707. The question then is whether the Barneses “purchased” the repair services within the meaning of the Act.

In Humber v. Morton, 426 S.W.2d 554 (Tex.1968), this court held that a builder/vendor impliedly warrants to a purchaser that a building constructed for residential use has been constructed in a good and workmanlike manner and is suitable for human habitation. Evans v. J. Stiles, Inc., 689 S.W.2d 399, 400 (Tex.1985). When the Barneses discovered the defect in their home, they had the option to immediately sue for money damages or give Melody Home the opportunity to cure the prob-. lem. The parties’ choices to allow and make repairs relate back to the original purchase and were a continuation of that transaction.

The Barneses did not lose their consumer status by allowing Melody Home to attempt to correct the problem and by deferring their lawsuit. Under Melody Home’s argument the Barneses would be penalized by losing their consumer status because they allowed repairs. The law encourages dispute resolution prior to litigation. See Tex.Bus. & Com.Code Ann. § 17.50A (Vernon Supp.1987). Accordingly we hold that the Barneses “purchased” the repair services.

Melody Home next contends that repair services do not carry with them an implied warranty that they will be performed in a good and workmanlike manner. Implied warranties are created by operation of law and are grounded more in tort than in contract. La Sara Grain v. First Nat’l Bank of Mercedes, 673 S.W.2d 558, 565 (Tex.1984); Humber, 426 S.W.2d at 556. A number of courts of appeals decisions have expressly or impliedly recognized such an implied warranty.² In addition, several articles, comments, and notes have concluded that the doctrine of implied warranty should apply to services.³ De-

spite its importance, this court has never ruled on this issue. But see Dennis v. Allison, 698 S.W.2d 94, 96 (Tex.1985) (Ray, J., dissenting).

An implied warranty arises by operation of law when public policy so mandates. Dennis v. Allison, 698 S.W.2d at 95; Jacob E. Decker & Sons, Inc. v. Capps, 139 Tex. 609, 164 S.W.2d 828, 829 (1942). Unlike the situations in Nobility Homes of Texas, Inc. v. Shivers, 557 S.W. 2d 77, 78 (1977) and La Sara Grain, 673 S.W.2d at 565, consumers of services do not have the protection of a statutory or common law implied warranty scheme. The issue presented in this case is whether the protection of Texas consumers requires the utilization of an implied warranty that repair services of existing tangible goods or property will be performed in a good and workmanlike manner as a matter of public policy. Nobility Homes of Texas, Inc., 557 S.W.2d at 78.

During the last thirty-fiye years, the United States has shifted from a goods to a services oriented economy.⁴ With this change has come a marked decrease in the quality of services.⁵ Similar quality control problems and consumer protection interests led this court and the legislature to apply the theory of implied warranty to products, goods, and new houses. See Humber, 426 S.W.2d at 562; McKisson v. Sales Affiliates, Inc., 416 S.W.2d 787, 789 (Tex.1967); Jacob E. Decker & Sons, 164 S.W.2d at 832; see also Tex.Bus. & Com. Code Ann. § 2.314 (Vernon 1968).

Just as with products, an examination of several strict liability policies favors the extension of the theory of implied warranty to service transactions. See Greenfield, 1974 Utah L.Rev. at 688-691; Prosser, The Assault Upon the Citadel, 69 Yale L.J. 1099, 1120-24 (1960); Comment, 17 Tex. Teeh.L.Rev. at 938-42. First, the public interest in protecting consumers from inferior services is paramount to any monetary damages imposed upon sellers who breach an implied warranty. Second, a service provider is in a much better position to prevent loss than is the consumer of the service. Many services are so complicated and individually tailored that a consumer is unable to independently determine quality and must depend on the experience, skill, and expertise of the service provider.⁶ Third, a consumer should be able to rely upon the expertise of the service provider. The application of implied warranty to services would encourage justifiable reliance on the service providers who would have more incentive to increase and maintain the quality of the services they provide. Fourth, a service provider is better able to absorb the cost of damages associated with inferior services through insurance and price manipulation than is the individual consumer.

As Justice Norvell wrote in Humber: That Court best serves the law which recognizes that the rules of law which grew up in a remote generation may, in the fullness of experience, be found to serve another generation badly, and which discards the old rule when it finds that another rule of law represents what should be according to the established and settled judgment of society, and no considerable property rights have become vested in reliance on the old rule.

426 S.W.2d at 561-62, quoting Cardozo, The Nature of the Judicial Process at 151 (1971). The caveat emptor rule as applied to services such as repairs is an anachronism patently out of harmony with modern service buying practices. It does a disservice not only to the ordinary prudent purchaser but to the industry itself by encouraging the purveyor of shoddy workmanship. Id. at 562.

We hold that an implied warranty to repair or modify existing tangible goods or property in a good and workmanlike manner is available to consumers suing under the DTPA. The legislative history of the DTPA indicates that the Act was intended to apply to all service providers.⁷ See H.J. of Tex., 63rd Leg., Reg. Sess. 2114-15 (1973) (rejecting proposals to amend DTPA to exempt insurance agents and brokers and licensed professionals from coverage of Act); Maxwell, Public and Private Rights and Remedies Under the Deceptive Trade Practices-Consumer Protection Act, 8 St. Mary’s L.J. 617, 640-41 (1977) (discussing the legislature’s refusal to exempt services from the coverage of the DTPA).

This case does not involve the laundry list of false misleading or deceptive acts or practices made actionable by section 17.-50(a)(1) of the DTPA. Instead, this case presents the question whether an implied warranty applies to repair or modification services of existing tangible goods or property. The question whether an implied warranty applies to services in which the essence of the transaction is the exercise of professional judgment by the service provider is not before us. Cf DeBakey v. Staggs, 612 S.W.2d 924 (Tex.1981) (attorney’s clients suing under the DTPA for attorney’s “unconscionable” actions are “consumers”). But see Dennis v. Allison, 698 S.W.2d 94 (Tex.1985) (implied warranty not available to doctor’s patient injured by improper treatment).

We define good and workmanlike as that quality of work performed by one who has the knowledge, training, or experience necessary for the successful practice of a trade or occupation and performed in a manner generally considered proficient by those capable of judging such work. See Griffin v. Eakin, 656 S.W.2d 187, 190-91 (Tex.App. — Austin 1983, writ ref’d n.r.e.); Burnett & Bean v. Miller, 205 Ala. 606, 88 So. 871, 872 (1921). Cf Garcia v. Color Tile Distrib. Co., 75 N.M. 570, 408 P.2d 145,148 (1965); Fairbanks, Morse & Co. v. Miller, 80 Okl. 265, 195 P. 1083, 1090 (1921). We do not require repairmen to guarantee the results of their work; we only require those who repair or modify existing tangible goods or property to perform those services in a good and workmanlike manner.⁸

In this case, the breach of the implied warranty was plainly within the common knowledge of laymen and did not require expert testimony. The jurors had sufficient knowledge to find that the failure to connect a washing machine drain would not be considered good and workmanlike by those capable of judging repair work.

Consistent with the trend in recent consumer protection legislation and sound public policy, we further hold that the implied warranty that repair or modification services of existing tangible goods or property will be performed in a good and workmanlike manner may not be waived or disclaimed. See e.g. Tex.Bus. & Com. Code Ann. § 17.42 (Vernon Supp.1987) (DTPA waiver unenforceable and void); Tex.Rev. Civ.Stat.Ann. art. 5221f, § 18 (Vernon Supp.1987) (waiver of the provisions of the Manufactured Housing Standards Act unenforceable and void). It would be incongruous if public policy required the creation of an implied warranty, yet allowed the warranty to be disclaimed and its protection eliminated merely by a pre-printed standard form disclaimer or an unintelligible merger clause. See G-W-L, Inc. v. Robichaux, 643 S.W.2d 392, 394-95 (Tex. 1982) (Spears, J., dissenting).

When disclaimers are permitted, adhesion contracts — standardized contract forms offered to consumers of goods and services on an essentially “take it or leave it” basis which limit the duties and liabilities of the stronger party — become commonplace. See, e.g., King v. Larsen Realty, Inc., 121 Cal.App.3d 349, 175 Cal.Rptr. 226, 231 (1981); Wheeler v. St. Joseph Hosp., 63 Cal.App.3d 345, 133 Cal.Rptr. 775, 783 (1976); Star Finance Corp. v. McGee, 27 Ill.App.3d 421, 326 N.E.2d 518, 522 (1975); Cushman v. Frankel, 111 Mieh.App. 604, 314 N.W.2d 705, 707 (1981); Guthmann v. La Vida Llena, 103 N.M. 506, 709 P.2d 675, 678 (1985). The consumer continues to expect that the service will be performed in a good and workmanlike manner regardless of the small print in the contract. A disclaimer allows the service provider to circumvent this expectation and encourages shoddy workmanship. To the extent that it conflicts with this opinion, we overrule G-W-L, Inc. v. Robichaux, 643 S.W.2d 392.

The final issue is whether the jury’s finding that Melody Home committed a knowing breach of this implied warranty justifies the award of discretionary damages under the DTPA. Section 17.50(a) of the DTPA provides that: “A consumer may maintain an action where any of the following constitute a producing cause of actual damages: ... (2) breach of an express or implied warranty.” The DTPA does not define the term “warranty” nor does it create any warranties. La Sara Grain, 673 S.W.2d at 565.

The DTPA should be liberally construed and applied to promote its underlying purposes — protecting consumers against breaches of warranty and providing efficient economical procedures to secure such protection.⁹ Tex.Bus. & Com. Code Ann. § 17.44 (Vernon Supp.1987). As mentioned earlier, section 17.45(2) expresses the legislative intent that providers of services should not escape the requirements of the Act. Allowing consumers to sue under section 17.50(a) for breach of an implied warranty that repair services will be done in a good and workmanlike manner is a logical, consistent, and intended interpretation of the Act. See Comment, 17 Tex. Tech L.Rev. at 934-36. Therefore it follows that the breach of an implied warranty to repair or modify existing tangible goods or property in a good and workmanlike manner is actionable under section 17.-50(a)(2) of the DTPA.

We overrule all of Melody Home’s points of error and affirm the judgment of the court of appeals.

CAMPBELL, J., files a concurring opinion in which WALLACE, J., joins. GONZALEZ, J., files a concurring opinion in which HILL, C.J., joins.

1 . Section 17.45(4) provides in pertinent part: " ‘Consumer’ means an individual ... who seeks or acquires by purchase or lease, any goods or services....” Service Contracts, 17 Tex.Tech L.Rev. 917 (1986); Comment, Guidelines for Extending Implied Warranties to Service Markets, 125 U.Pa.L. Rev. 365 (1976); Note, The Application of Implied Warranties to Predominantly “Service" Transactions, 31 Ohio St.LJ. 580 (1970); Note, Continuing the Common Law Response to the New Industrial State: The Extension of Enterprise Liability to Consumer Services, 22 U.C.L.A. L.Rev. 401 (1974). But see, Sales, The Service-Sales Transaction: A Citadel Under Assault, 10 St. Mary’s LJ. 13 (1978); Note, Breach of Implied Warranty Under DTPA as Applied to Service Contracts: Diversified Human Resources Group, Inc. v. PB-KBB, Inc., 37 Baylor L.Rev. 549 (1985).

2 . See Thrall v. Renno, 695 S.W.2d 84, 87 (Tex. App.—San Antonio, 1985, writ refd n.r.e.) (brick patio construction); Diversified Human Resources Group, Inc. v. PB-KBB, Inc., 671 S.W. 2d 634, 636 (Texas App.—Houston [1st Dist.] 1984, writ refd n.r.e.) (employee furnishing);. Griffin v. Eakin, 656 S.W.2d 187, 190 (Tex.App. —Austin 1983, writ refd n.r.e.) (book printing); Holifield v. Coronado Bldg. Inc., 594 S.W.2d 214, 215 (Tex.App.—Houston [14th Dist.] 1980, no writ) (house repair); Import Motors Inc. v. Matthews, 557 S.W.2d 807, 809 (Tex.Civ.App.—Aus-tin 1977, writ refd n.r.e.) (car repair); Boman v. Woodmansee, 554 S.W.2d 33, 34 (Tex.Civ.App.— Austin 1977, no writ) (swimming pool installation); Trends, Inc. v. Stafford-Lowdon Co., 537 S.W.2d 778, 782 (Tex.Civ.App.—Fort Worth 1976, writ refd n.r.e.) (printing); Mercedes Dusting Services, Inc. v. Evans, 353 S.W.2d 894, 896 (Tex.Civ.App.—San Antonio 1962, no writ) (airplane repair).

3 . See D. Bragg, P. Maxwell, J. Longley, Texas Consumer Litigation § 5.04 (2d ed. 1983); Greenfield, Consumer Protection in Service Transactions—Implied Warranties and Strict Liability in Tort, 1974 Utah L.Rev. 661 (1974); Norman, Consumer Service Transactions, Implied Warranties and a Mandate for Realistic Reform, 11 Loy.U.Chi.L.J. 405 (1980); Singal, Extending Implied Warranties Beyond Goods: Equal Protection for Consumers of Services, 12 New Eng. 859 (1977); Comment, Expansion of Implied Warranty Coverage Under the DTPA:

4 .

Percentage of Gross National Product

by Major Type of Product

YEAR SERVICES GOODS STRUCTURES

1950 30.9 56.6 12.5

1960 38.2 50.1 11.7

1970 43.3 46.3 10.4

1980 46.5 43.3 10.2

1984 48.1 42.1 9.8

Commerce Dept., Statistical Abstract of the United States 431 (106th ed. 1986). See generally, K. Albrecht & R. Zemke, Service America! Doing Business in the New Economy (1985).

The service GNP percentage has been estimated as high as 68% by some economists. See Quinn and Gagnon, Will Services Follow Manufacturing into Decline?, Harvard Bus.Rev., Nov.Dee. 1986 at 95. In fact, of the 12.6 million new jobs created since 1982, almost 85% have been in service industries as opposed to goods-producing fields. Koepp, Pul-eeze! Will Somebody Help Me?, Time, February 2, 1987 at 50.

5 . See generally Koepp at 48; Main, Toward Service Without a Snarl, Fortune, March 23, 1981 at 58; Quinn & Gagnon at 103; Tuchman, The Decline of Quality, New York Times Magazine, November 2, 1980 at 38.

6 . “This is a question of consumer. Of helpless consumer. Of consumer who takes what he gets, because he does not know enough technically, to test even what is before his eyes.” Llewellyn, On Warranty of Quality and Society: II, 37 Colum.L.Rev. 341, 404 (1937).

7 . At the time of the enactment of the DTPA in 1973, Chief Justice John Hill, then Attorney General, testified before the House Committee on Business and Industry that the DTPA was intended to apply to all services:

CHAIRMAN: Are there any questions for General Hill? The Chair recognizes Mr. Heatly-

HEATLY: General, this bill, when you said it did not leave anyone out, in other words, this takes in the oil and gas industry, the insurance industry — the reason I’m naming these first, is that I’m going by the largest ones first, the refrigerators, the stove, the automobile, I mean it’s a Mother Hubbard, it takes them all?

HILL: It deals with any firm or individual who is engaged in a deceptive trade practice as defined by the bill. So the answer to the question would be, yes, at any level or from any source.

The Deceptive Trade Practices — Consumer Protection Act: Hearings on Tex.H.B. 417 Before the House Committee on Business and Industry, 63rd Leg. 17 (Feb. 27, 1973).

In 1977, Attorney General Hill again noted that a significant aspect of the DTPA was the repeal of prior exemptions. Hill, Consumer Protection Symposium: Introduction, 8 St. Mary’s L.J. 609, 613 (1977).

8 . The Gonzalez concurring opinion, in its zeal, blindly overlooks the essence of the court’s holding. In strict liability cases, the focus is on the product and not on the conduct of the producer. By contrast, the inquiry in a breach of warranty case concerns the performance of the service provider.

9 . A DTPA actionable implied warranty will further the policy of giving consumers an efficient and economical means of securing protection from poor quality services. Often, the monetary damages involved with inferior repair services do not justify the costs of suit under the traditional theories of negligence or breach of contract. Under the DTPA, a prevailing plaintiff may recover attorneys’ fees and discretionary damages. Tex.Bus. & Com.Code Ann. § 17.50 (Vernon Supp. 1987).