Wawak v. Stewart

449 S.W.2d 922, 247 Ark. 1093, 1970 Ark. LEXIS 1398

Opinions

George Rose Smith, Justice.

The defendant-appellant Wawak, a house builder, bought a lot in North Little Rock in the course of his business, built a house on it, and sold it to the appellees Stewart for $28,500. The heating and air-conditioning ductwork had been embedded in the ground before the concrete-slab floor was poured above that ductwork. Some months after the Stewarts moved into the house a serious defect manifested itself, in that heavy rains caused water and particles of fill to seep into the ducts and thence through the floor vents into the interior of the house, with consequent damage that need not be described at the moment.

The Stewarts brought this action for damages. The great question in the case, overshadowing all other issues, is whether there is any implied warranty in a contract by which the builder-vendor of a new house sells it to its first purchaser. The trial court sustained the theory of implied warranty and awarded the Stew-arts damages of $1,309.

The trial court was right. Twenty years ago one could hardly find any American decision recognizing the existence of an implied warranty in a routine sale of a new dwelling. Both the rapidity and the unanimity with which the courts have recently moved away from the harsh doctrine of caveat emptor in the sale of new houses are amazing, for the law has not traditionally progressed with such speed.

Yet there is nothing really surprising in the modern trend. The contrast between the rules of law applicable to the sale of personal property and those applicable to the sale of real property was so great as to be indefensible. One who bought a chattel as simple as a walking stick or a kitchen mop was entitled to get his money back if the article was not of merchantable quality. But the purchaser of a $50,000 home ordinarily had no remedy even if the foundation proved to be so defective that the structure collapsed into a heap of rubble.

Several law review articles, of which the earliest was published in 1952, forecast the new developments. Their titles suggest their contents: Dunham, Vendor’s Obligation as to Fitness of Land For a Particular Purpose, 37 Minn. L. Rev. 108 (1952); Bearman, Caveat Emptor in Sales of Realty — Recent Assaults Upon the Rule, 14 Vanderbilt L. Rev. 541 (1961); Haskell, The Case For an Implied Warranty of Quality in Sales of Real Property, 53 Georgetown L. Jour. 633 (1965); Roberts, The Case of the Unwary Home Buyer: The Housing Merchant Did It, 52 Cornell L. Q. 835 (1967). In 1963 a new edition of Williston’s Contracts added its weight to the movement, pointing out a practical advantage in the new point of view: “It would be much better if this enlightened approach were generally adopted with respect to the sale of new houses for it would tend to discourage much of the sloppy work and jerry-building that has become perceptible over the years.” Williston, Contracts, § 926A (3d ed. 1963).

In the past decade six states have recognized an implied warranty — of inhabitability, sound workmanship, or proper construction — in the sale of new houses by vendors who also built the structures. Carpenter v. Donohoe, 154 Colo. 78, 388 P. 2d 399 (1964); Bethlahmy v. Bechtel, 91 Idaho 55, 415 P. 2d 698 (1966); Schipper v. Levitt & Sons, 44 N. J. 70, 207 A. 2d 314 (1965); Waggoner v. Midwestern Dev. Co., S. D., 154 N. W. 2d 803 (1967); Humber v. Morton, Texas, 426 S. W. 2d 554, 25 A. L. R. 3d 372 (1968); House v. Thornton, Wash., 457 P. 2d 199 (1969). The near unanimity of the nimity of the judges in those cases is noteworthy. Of the 36 justices who made up the six appellate courts, the only dissent noted was that of Justice Griffin in the Texas case, who dissented without opinion.

A few excerpts from those recent opinions will illustrate what seems certain to be the accepted rule of the future. In the 8chipper case the New Jersey court had this to say:

The law should be based on current concepts of what is right and just and the judiciary should be alert to the never-ending need for keeping its common law principles abreast of the times. Ancient distinctions which make no sense in today’s society and tend to discredit the law should be readily rejected. . . . We consider that there are no meaningful distinctions between Levitt’s [a large-scale builder-seller] mass production and sale of homes and the mass production and sale of automobiles and that the pertinent overriding considerations are the same.

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Caveat emptor developed when the buyer and seller were in an equal bargaining position and they could readily be expected to protect themselves in the deed. Buyers of mass produced development homes are not on an equal footing with the builder vendors and are no more able to protect themselves in the deed than are automobile purchasers in a position to protect themselves in the bill of sale. Levitt expresses the fear of “uncertainty and chaos” if responsibility for defective construction is continued after the builder vendor’s delivery of the deed and its loss of control of the premises, but we fail to see why this should be anticipated or why it should materialize any more than in the products liability field where there has been no such result.

A similar point of view was expressed in the House case hy the Washington Supreme Court:

As between vendor and purchaser, the builder-vendors, even though exercising reasonable care to construct a sound building, had by far the better opportunity to examine the stability of the site and to determine the kind of foundation to install. Although hindsight, it is frequently said, is 20-20 and defendants used reasonable prudence in selecting the site and designing and constructing the building, their position throughout the process of selection, planning and construction was markedly superior to that of their first purchaser-occupant. To borrow an idea from equity, of the innocent parties who suffered, it was the builder-vendor who made the harm possible. If there is a comparative standard of innocence, as well as of culpability, the defendants who built and sold the house were less innocent and more culpable than the wholly innocent and unsuspecting buyer. Thus, the old rule of caveat emptor has little relevance to the sale of a brand-new house by a vendor-builder to a first buyer for purposes of occupancy.

We apprehend it to be the rule that, when a vendor-builder sells a new house to its first intended occupant, he impliedly warrants that the foundations supporting it are firm and secure and that the house is structurally safe for the buyer’s intended purpose of living in it. Current literature on the subject overwhelmingly supports this idea of an implied warranty of fitness in the sale of new houses.

The Supreme Court of Texas joined in the widespread criticism of the doctrine of caveat emptor in the Humber opinion:

If at one time in Texas the rule of caveat emptor had application to the sale of a new house by a vendor-builder, that time is now past. The decisions and legal writings herein referred to afford numerous examples and situations illustrating the harshness and injustice of the rule when applied to the sale of new houses by a builder-vendor, and we need not repeat them here. Obviously, the ordinary purchaser is not in a position to ascertain when there is a defect in a chimney flue, or vent of a heating apparatus, or whether the plumbing work covered by a concrete slab foundation is faulty.

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The caveat emptor rule as applied to new houses is an anachronism patently out of harmony with modern home buying practices. It does a disservice not only to the ordinary prudent purchaser but to the industry itself by lending encouragement to the unscrupulous, fly-by-night operator and purveyor of shoddy work.

In 1957 an intermediate New Jersey court refused to recognize implied warranties in the sale of realty. Levy v. C. Young Constr. Co., 46 N. J. Super. 293, 134 A. 2d 717, affirmed on other grounds 26 N. J. 330, 139 A. 2d 738 (1958). That case is no longer the law in New Jersey, owing to the New Jersey Supreme Court’s decision in the Schipper case, but we should add that the intermediate court’s arguments were fully answered by the Supreme Court of Idaho in Bethlahmy v. Bechtel, supra:

The reasoning of the majority in the New Jersey decision that chaotic uncertainty would pervade the entire real estate field if sellers were subject to liability for implied warranty of fitness, and that the rules of caveat emptor would work no harshness on purchasers of real estate, is fallacious, unrealistic and unjust when applied to the facts of the case before us. In the situation here the imposition of an implied warranty of fitness would work no more ■uncertainty or chaos than the warranties commonly applied in sales of personal property. Likewise, the statement by the New Jersey court that the plaintiffs had an opportunity to protect themselves by exacting warranties in the contract and reserving them in the deed, has no application to the facts of the case at bar. A buyer who has no knowledge, notice, or warning of defects, is in no position to exact specific warranties. Any written warranty demanded in such a case would necessarily be so general in terms as to be difficult to enforce. It would be like the verbal warranty by defendant in this case, that the house would be a “quality home.”

As might be expected, we have been presented with the timeworn, threadbare argument that a court is legislating whenever it modifies common-law rules to achieve justice in the light of modern .economic and technological advances. That same argument was doubtless made in a famous case that parallels this one: MacPherson v. Buick Motor Co., 217 N. Y. 382, 111 N. E. 1050, Ann. Cas. 1916C, 440, L. R. A. 1916F, 696 (1916). There the court, with respect to the sale of automobiles, abolished a requirement of privity of contract that was just as firmly embedded in the common law as is the rule that we are now re-examining. Yet the doctrine of the MacPherson case is now accepted as commonplace throughout the nation. We have no doubt that the modification of the rule of caveat emptor that we are now considering will be accepted with like unanimity within a few years.

After the case at bar had been submitted to the court we invited the filing of amici curiae briefs, to avoid the possibility that persuasive arguments might be overlooked. The only brief that urges adherence to the old rule was filed by counsel for the Arkansas Home Builders Association.

The AHBA. brief makes one point that merits comment. Counsel state that the AHBA “recognizes the need for the imposition of a warranty upon new construction.” To that end the Association included a one-year warranty requirement in a bill that it sponsored, unsuccessfully, in the 1967 and 1969 sessions of the legislature. The main purpose of the bill, however, was to regulate the homebuilding industry by the creation of a governing board and the imposition of licensing requirements upon those engaged in the business.

We are not impressed by the AHBA’s suggestion that we await legislative action, even though the Association concedes that some form of warranty is needed. To begin with, the General Assembly’s repeated refusal to enact the proposed law hardly gives assurance that it will be passed in the near future. Furthermore, whatever decision we reach in this case can have no effect upon the General Assembly’s freedom to change the law as it sees fit. To the contrary, a judicial decision may focus legislative attention upon the problem. See, for example, Act 165 of 1969, which was a prompt legislative reaction to our decision in Parish v. Pitts, 244 Ark. 1239, 429 S. W. 2d 45 (1968).

To sum up, upon the facts before us in the case at bar we have no hesitancy in adopting the modern rule by which an implied warranty may be recognized in the sale of a new house by a seller who was also the builder. That rule, however, is a departure from our earlier cases; so, to avoid injustice, we adhere to the doctrine announced in Parish v. Pitts, supra, by which the new rule is made applicable only to thé case at hand and to causes of action arising after this decision becomes final.

There are three subordinate points that require discussion. First, Wawak insists that all warranties, express or implied, were negatived by this paragraph in the offer-and-acceptance agreement that preceded the execution of a warranty deed when the sale was consummated :

Buyer certifies that he has inspected the property and he is not relying upon any warranties, representations or statements of the Agent or Seller as to age or physical condition of improvements.

Even if we assume that the preliminary contract was not merged in the warranty deed, we think it plain that the quoted paragraph did not exclude an implied warranty with respect to the particular defect now in question, which lay beneath the concrete floor and could not possibly have been discovered by even the most careful inspection. The quoted paragraph does not purport to exclude all warranties. It merely states that the buyer has inspected the property and is not relying on any warranties as to the age or physical condition of the improvements. Construing the printed contract against the seller, who evidently prepared it, we hold that the clause applies only to defects that might reasonably have been discovered in the course of an inspection made by a purchaser of average experience in such matters.

Secondly, the trial court’s judgment for $1,309 was composed of the following items of damage to the house and its furnishings, none of which the Stewarts had yet paid:

To clean rug $ 75.00

To paint house (interior) 235.00

To clean furniture 22.00

To replace lamp shades 35.00

To clean duct system 200.00

To replace draperies 300.00

Minor repairs 22.00

Drain tile to correct leakage 420.00

$1,309.00

Wawak insists that the recovery of the foregoing items is barred by the rule that a plaintif f must use reasonable care to mitigate his damages and that if the damages could have been avoided at reasonable expense then the measure of damages is the amount of such expense. Curtner v. Bank of Jonesboro, 175 Ark. 539, 299 S. W. 994 (1927); Louisville, N. O. & T. R. R. v. Jackson, 123 Ark. 1, 184 S. W. 450, Ann. Cas. 1918A, 604 (1916); Young v. Berman, 96 Ark. 78, 131 S. W. 62, 34 L. R. A. (n. s.) 977 (1910).

The pertinent facts are these: The subterranean ductwork radiates from a metal chamber or plenum, which sits under the heating and air-conditioning units. When Wawak and his ductwork subcontractor, Plummer, were first notified by Stewart of the seepage, they siphoned off the water through the plenum. They next installed drain tile and gravel along two sides of the house, but those measures failed to correct the trouble. In the meantime Stewart bought a sump pump at a cost of $12.50. Whenever rains caused seepage in the ductwork Stewart would place his pump in the plenum, about two hours after the water had accumulated, and pump the duct system dry. Under that procedure some of the seepage got into the house and caused most of the damage that we have itemized above.

Soon after the difficulty first arose Wawak and Plummer proposed the installation of an automatic sump pump, which cost $76 or $78. Their plan was to dig out the floor of the plenum so that the automatic pump would be below the level of the ducts. Whenever the water at the site of the pump rose to a depth of three quarters of an inch the pump would start automatically and pump out the water. Thus the water would never rise high enough to overflow the floor vents and damage the interior of the house. Wawak and Plummer do not contend that their plan would have corrected the subterranean defect. From Wawak’s testimony: “I figured if we could get the pump in there to pump it out, then we could continue to try to find out where [the water] was coming from. It wasn’t our intention to just leave it.” Wawak stated that when he offered to put in the automatic pump there was no damage to the house except some staining of the draperies, which were cleaned at Wawak’s expense.

Stewart refused to allow the automatic pump to be installed, insisting that he wanted to know where the water was coming from and would accept nothing less. When the proffer of the pump was refused, Wawak and Plummer abandoned their efforts to correct the trouble. Thereafter Stewart used his own pump in the manner that we have described, with attendant damage to the house and its furnishings. A period of two years or more elapsed before this action was finally brought.

In the main Wawak is correct in his argument that the Stewarts should have mitigated their damages by permitting the installation of the automatic pump. On the record made below it is an undisputed fact that such a pump would have avoided practically all the itemized damages that were allowed by the trial court.

The pump, however, would not have corrected the basic defect, nor does Wawak so contend. Stewart testified without contradiction and without objection that a man named Gordon could remedy the defect by installing drain tile along the remaining two sides of the house at a cost of $425. That corrective measure would not have been rendered unnecessary by the installation of the automatic pump; so the Stewarts’ duty to mitigate their damages does not involve that item. The amount of the Stewarts’ judgment will therefore be reduced to $420 — the amount allowed by the trial court for the one item of damage that we find to be recoverable.

Thirdly, Wawak argues that he is entitled to judgment over against the appellee Plummer, who installed the ductwork under a subcontract with Wawak. It cannot be said as a matter of law, however, that Plummer was at fault, because the slab floor above the ducts was poured by another subcontractor. Upon this point the trial court’s judgment is sufficiently supported by the proof.

Finally, what we have said also disposes of the appellees’ cross appeal, by which they contend that the court erred in not allowing them the full amount of some of their itemized claims. In any event recovery upon the cross appeal would have to be denied under the rule established in Fulbright v. Phipps, 176 Ark. 356, 3 S. W. 2d 49 (1928), and the cases that have followed it, holding that the verdict need not correspond in amount to the proof adduced by either party.

The judgment as modified is affirmed.

Harris, C. J., and Fogleman and Byrd, JJ., dissent.