Andrulis v. Levin Const. Corp.

• Decision Date: 01 September 1992
• Docket Number: No. 101,101
• Citation: 331 Md. 354,628 A.2d 197
• Parties: Peter J. ANDRULIS, Jr. et ux. v. LEVIN CONSTRUCTION CORPORATION, d/b/a The Levin Companies. ,
• Court: Maryland Court of Appeals

Page 354

331 Md. 354

628 A.2d 197

Peter J. ANDRULIS, Jr. et ux. v. LEVIN CONSTRUCTION CORPORATION, d/b/a The Levin Companies.

No. 101, Sept. Term, 1992.

Court of Appeals of Maryland.

July 28, 1993.

Michael I. Greenberger (William S. Moore, Elizabeth M. Brown, Shea and Gardner, on brief), Washington, DC, for petitioners.

John P. McKenna, Jr. (O'Malley & Miles, on brief), Upper Marlboro, MD, for respondent.

Argued before MURPHY, C.J., ELDRIDGE, RODOWSKY, CHASANOW, KARWACKI and ROBERT M. BELL, JJ., and CHARLES E. ORTH, Jr., Associate Judge of the Court of Appeals (retired), Specially Assigned.

RODOWSKY, Judge.

This is an action for breach of a construction contract brought by homeowners against the builder. Two legal issues are presented. The first involves implied warranties under Maryland Code (1974, 1988 Repl.Vol., 1992 Cum.Supp.), § 10-203 of the Real Property Article. ¹ That question is whether § 10-203 warranties include work done by the builder other than in or on the dwelling house. The second issue is whether the trial court properly invoked the principle of economic waste in order to limit expectation interest damages for certain deficiencies in the work.

In 1987 Levin Construction Corporation (Levin) commenced construction of the house located at 7220 Armat Drive, Bethesda, Montgomery County, Maryland. The next year Levin offered the substantially completed dwelling and lot for sale. Peter J. Andrulis, Jr. and Marilyn W. Andrulis (the Andrulises), husband and wife, entered into a contract with Levin (the Contract) under which Levin agreed to add certain features, including a forty foot by sixteen foot swimming pool to be constructed in the spring of 1989. The Andrulises promised to purchase the land and improvements for $1,276,900, consisting of $1,241,900 cash at closing and a $35,000 promissory note. At the closing, held in December 1988, $15,748 of the cash was escrowed to cover specified, incomplete work that should have been completed by closing.

The instant action was commenced in February 1990 in the Circuit Court for Montgomery County as a complaint for interpleader by the escrowee. The Andrulises were designated as plaintiffs and Levin as defendant. A court trial of the matter consumed ten days, in stages, between May and July 1991, resulting in a finding that the Andrulises were entitled to $138,033 in damages. The note was declared paid and satisfied, and the interpleaded funds were awarded to the Andrulises. After those credits, including interest, judgment was entered against Levin for $78,616.40. The order entering judgment listed thirty deficiencies and specified the amount awarded as to each.

Levin appealed to the Court of Special Appeals. That court, in an unreported opinion and for reasons to be set forth, infra, affirmed in part, reversed in part, and remanded for further proceedings. The Andrulises petitioned for certiorari, and Levin conditionally cross-petitioned. We granted both petitions.

I

A general description of the premises is required for an understanding of the legal issues concerning warranties.

A

7220 Armat Drive is a trapezoidally shaped lot. The street frontage, which is the north side of the lot, is 87 feet. ² The rear, or south, lot line is 78 feet. The western boundary is 147 feet, while the eastern is 206 feet. The three-story brick house faces the street, and is approached by a circular driveway. From entrance to rear the building measures 56 feet. For most of that depth the width of the house is 71 feet. Included in the building on its east side is a one and one-half story, two car garage facing the street. Behind the house is a large patio, and behind the patio is the swimming pool.

The distinctive feature of the lot is that, moving from the north boundary to the south boundary, the ground ascends from an elevation of 30 feet to perhaps 58 feet. The front entrance to the house, reached by an outside staircase, is seven feet above ground level, but the rear entrances are level with the patio. The in-ground swimming pool is at a higher elevation than the patio, and the pool's water surface and its surrounding concrete apron or "bib" create a terrace in the slope ascending from the patio to the south boundary. There is an outside walkway, connecting the patio to the front lawn, on the west side of the house. As a result of this construction at varying elevations, there are retaining walls between the house and the property's rear, west, and east boundaries. The walls to the rear and on the west side are made of brick, with large planters incorporated into the total configuration of walls and steps.

Specifically, there are staircases, planters, and a brick retaining wall on the north, or house, side of the pool, rising from the patio level to the pool level. There is a brick retaining wall on the south side of the pool, supporting the slope from the pool to the rear of the premises. There are brick retaining walls on the east and west sides of the pool. There is a brick retaining wall on the west side between the walkway and the boundary. There is also a timber retaining wall on the east side of the house.

The circuit court found that the § 10-203 warranties had been breached by defects in the above-described work. That finding was based principally on the testimony of the Andrulises' expert, John Thomas (Thomas), an architect and builder. Much of the testimony relevant to the instant § 10-203 issue had to do with drainage of surface water and of percolating ground water. Thomas described either the absence of or deficiencies in, moisture protection or waterproofing, weepholes, and foundation drainage systems.

Levin submits that the maximum "swing" on the § 10-203 issue is $41,040, consisting of the following items:

                West side retaining wall            $10,000.00
                Waterproofing of retaining walls      6,000.00
                Retaining wall weepholes              4,500.00
                Sidewalk caulking                       600.00
                Garage                                5,000.00
                Timber retaining wall                 1,100.00
                Rear yard, catch basin, and grates    4,130.00
                Planter drains and tie-ins            5,510.00
                Pool lights and light covers          1,000.00
                Patio slab                            2,500.00
                Front walkway                           450.00
                Fence posts                             250.00
                                                    ----------
                              Total                 $41,040.00
                

The Court of Special Appeals concluded that, of the above-listed items, only the garage was clearly within the § 10-203 warranty and that those items described as west side retaining wall, waterproofing of retaining walls, retaining wall weepholes, and timber retaining wall would be within the warranty, if those "walls are necessary for the house's structural stability." Under the mandate of the Court of Special Appeals, that factual issue would be determined on remand. ³

B

Under the common law of Maryland, except in unusual circumstances, " 'there is no implied warranty in the sale of a completed residence.' " Thomas v. Cryer, 251 Md. 725, 726, 248 A.2d 795, 795 (1969) (quoting Allen v. Wilkinson, 250 Md. 395, 398, 243 A.2d 515, 517 (1968)). The General Assembly responded to the absence of warranties by Chapter 151 of the Acts of 1970 which, as amended, is now Title 10, Subtitle 2, "Express and Implied Warranties." Section 10-203(a), in its aspects relevant to the issue before us, has been substantially unchanged since its enactment in 1970. Those relevant parts read:

"[I]n every sale, warranties are implied that, at the time of the delivery of the deed to a completed improvement or at the time of completion of an improvement not completed when the deed is delivered, the improvement is:

(1) Free from faulty materials;

(2) Constructed according to sound engineering standards;

(3) Constructed in a workmanlike manner; and

(4) Fit for habitation."

Definitions for the subtitle, as originally enacted, provided that " '[i]mprovements' includes all fixtures and structures attached to realty IN THE NATURE OF PRIVATE DWELLING UNITS." The capitalized words were added to the definition in the course of passage of Chapter 151.

The definition of improvements was amended by Chapter 694 of the Acts of 1971. Preambles to the bill advise that the subtitle "was intended to cover newly constructed homes only," and that "[t]here is some confusion as to whether or not this law applied to or applies to already existing homes or would cover improvements made by individual homeowners." The 1971 enactment then made the following amendment (italics indicate new matter in the bill as introduced to then existing law; brackets indicate matter deleted from then existing law by the bill as introduced; and capitals indicate amendments in the course of passage):

" 'Improvements' includes all newly constructed private dwelling units and all fixtures and structures [attached to realty in the nature of private dwelling units] which are made a part of the newly constructed private dwelling units at the time of their construction by BUILDING contractors and subcontractors."

Following Code revision, that definition, now found in § 10-201(b), reads:

" 'Improvements' includes every newly constructed private dwelling unit, and fixture and structure which is made a part of a newly constructed private dwelling unit at the time of construction by any building contractor or subcontractor."

The Revisor's Note to § 10-201 advises that the only changes to subsection (b) "are in style." Md.Code (1974), Revisor's Note following § 10-201.

C

The Andrulises contend that each of the disputed items is a "fixture [or] structure which [was] made a part of [the] newly constructed private dwelling unit" constructed by Levin under the Contract. Levin, on the other hand, contends that the Court of Special Appeals properly considered legislation enacted after the 1970 adoption of Subtitle 2 in order to construe "improvements" as...