Allison v. Home Sav. Ass'n of Kansas City, WD

• Decision Date: 23 November 1982
• Docket Number: No. WD,WD
• Citation: Allison v. Home Sav. Ass'n of Kansas City, 643 S.W.2d 847 (Mo. App. 1982)
• Parties: John B. ALLISON, Wesley Allison, and Searle L. Allison, Appellants, v. HOME SAVINGS ASSOCIATION OF KANSAS CITY, Respondent. 32743.
• Court: Missouri Court of Appeals

Page 847

643 S.W.2d 847

John B. ALLISON, Wesley Allison, and Searle L. Allison, Appellants, v. HOME SAVINGS ASSOCIATION OF KANSAS CITY, Respondent.

No. WD 32743.

Missouri Court of Appeals Western District.

Nov. 23, 1982.

H. Kent Desselle (argued), Desselle & White, Independence, for appellants.

Frank P. Sebree (argued), Shook, Hardy & Bacon, Kansas City, for respondent.

Before NUGENT, P.J., and TURNAGE and LOWENSTEIN, JJ.

NUGENT, Presiding Judge.

The Allisons appeal from a judgment of the circuit court which granted the motion of Home Savings Association of Kansas City for judgment notwithstanding the verdict on plaintiffs' claim for an alleged breach of an implied warranty of fitness owed to the Allisons as first purchasers of two houses. Home Savings appeals from the trial court's denial of its motion for a new trial on the issue of damages in its counterclaim for lost rents and profits resulting from the Allisons' failure to vacate the houses after foreclosure. We affirm the judgment with respect to the granting of judgment notwithstanding the verdict in favor of Home Savings, but reverse and remand for a redetermination of damages on the counterclaim by Home Savings.

In September, 1974 S. Wesley Allison and his wife, Searle L. Allison, purchased a new house at 14008 Dunbar Court in the Merrywood subdivision of Grandview. In the same month, Mr. Allison and his son, John B. Allison, purchased a new house at 14011 Ballantrae Drive in the same subdivision, which has since been renamed River Oaks. Both houses were purchased from Home Savings, which furnished the financing for construction of the Merrywood development. Home Savings acquired ownership of the subdivision from the developer in May, 1974 apparently after the developer encountered financial difficulties. Construction of the two houses was completed before Home Savings acquired title to the project. After viewing the houses with a representative of Home Savings, the Allisons negotiated both loans with Home Savings and executed a promissory note secured by a deed of trust on each of the houses. The appraised value of the residence at 14008 Dunbar Court at the time of purchase, according to Home Savings, was $30,500 with a purchase price of $25,950. Purchase price of the house at 14011 Ballantrae Drive--appraised at $29,500 by Home Savings--was $23,950.

These appeals have their procedural origin in a suit filed in 1976 by the River Oaks Homes Association against the Allisons and other subdivision residents for failure to pay monthly assessments to the association. While that action was pending, the Allisons fell behind in their mortgage payments to Home Savings. The last payment made by the Allisons on the 14008 Dunbar Court residence was in December, 1977, and the last payment on the house at 14011 Ballantrae Drive was made in February, 1978. Home Savings instituted foreclosure proceedings on both houses which culminated in a trustee's sale on November 24, 1978, at which it acquired title to the houses. Home Savings notified the Allisons by letter that they were to vacate the houses on or before December 15, 1978.

Meanwhile, in August, 1978 the Allisons filed an amended answer in the action brought by the River Oaks Homes Association. In addition to stating a counterclaim against the River Oaks Homes Association, the amended answer included a third party claim against Home Savings in four counts. Counts I and II sought to prevent or set aside the foreclosure sales, and Counts III and IV sought damages for alleged breach of an implied warranty of habitability with respect to each house.

Despite being served with notice to vacate by December 15, 1978, the Allisons continued to live in both houses for several months. When they did move out in the spring of 1979, they left behind in each house certain items of personal property which were still on the premises at the time of trial. In October, 1980 Home Savings filed a counterclaim against the Allisons seeking possession of the two houses and damages of $250 per month (fair rental value) per house for willful and unlawful possession.

Before the trial began on March 3, 1981, the Allisons and the River Oaks Homes Association reached a settlement, so that River Oaks was not a participant at trial and is not involved in these appeals. The trial court accordingly realigned the parties, designating the Allisons as plaintiffs, and Home Savings as defendant. The Allisons dismissed Counts I and II of their third party claim against Home Savings, and the case then proceeded to trial on: (1) the claim of plaintiffs for damages for alleged defects in construction of the two houses, and (2) the counterclaim by Home Savings for damages for unlawful possession of the houses by plaintiffs.

John B. Allison testified that after buying the residence at 14011 Ballantrae Drive he experienced a number of difficulties with the house, including a fallen ceiling beam, frozen and broken water pipes which caused water damage to walls and carpeting, a defective front door frame, a door to an outside storage compartment which "fell apart", peeling bedroom wallpaper, a sway in the roof, water damage in the bathroom, a buckled wall in the master bedroom, and ill-fitting door frames. Allison informed Home Savings of these problems, and testified that the River Oaks project superintendent undertook certain repairs, but made no attempt to fix any problems after "the first part of 1975". The project superintendent remembered no complaints other than the one concerning frozen pipes, and testified that damage from that condition was repaired.

Mr. and Mrs. Allison testified that the defects in their house at 14008 Dunbar Court included a patio door and kitchen window which allowed water to enter the house when it rained, leaks in the outside walls, a leak in the upstairs bathroom which damaged the dining room ceiling, doors which fell off hinges, a clothes shelf which collapsed, and a hump in the living room floor. Mr. Allison further testified to the demands he made upon Home Savings for repairs and the inadequacy of the responses.

Plaintiffs produced expert testimony from two architects who testified that the low ground on which the house at 14008 Dunbar Court was built led to improper drainage, and that the materials and methods used in construction were inferior. The sole evidence of the value of the houses in their present condition came from plaintiffs, who testified that each was worth $19,000-$20,000 at time of trial. Plaintiffs acknowledged that on the advice of counsel, they left personal property in each house after they moved.

John Cowan, vice president of Home Savings and project manager of the River Oaks subdivision, cited the continued presence of plaintiffs' personal property, including furniture, washers, dryers, food and clothing, as one of the problems preventing Home Savings from gaining possession of the properties and putting them to use. He described one of the houses as "a pigpen". Home Savings produced testimony from a home builder and project superintendent for the subdivision, who owned rental property in and near River Oaks. He estimated the fair monthly rental value of the Ballantrae Drive house at $280-$290 in 1978 and $320-$330 at time of trial. Estimated rental values for the Dunbar Court house were $300 per month in 1978 and $350-$360 at time of trial. When confronted on cross-examination with photographs of the defects in the two houses, however, he admitted that he would not rent property in such condition.

The jury found in favor of plaintiffs on their claim for breach of implied warranties, and awarded damages of $5 with respect to the house at 14011 Ballantrae Drive and $7,000 in damages for defects in the structure at 14008 Dunbar Court. On the counterclaim of Home Savings against plaintiffs for unlawful possession, the jury returned a verdict in favor of Home Savings and awarded damages of $5 with respect to the house at 14011 Ballantrae Drive and $500 for the residence at 14008 Dunbar Court.

The trial court subsequently granted the motion of Home Savings for judgment notwithstanding the verdict, set aside the jury's award of damages to plaintiffs and entered judgment for Home Savings on the claimed breach of implied warranties. The trial court also denied the motion filed by Home Savings for a new trial on the issue of damages on its counterclaim against plaintiffs.

The Allisons' appeal

In their appeal from the judgment notwithstanding the verdict, the Allisons contend that the trial court erred because: (1) Home Savings, as the vendor of the properties, breached an implied warranty of fitness owed to the plaintiffs as first purchasers, and (2) Home Savings' extensive participation in the project as a lender created a duty to purchasers to exercise reasonable care in preventing defective construction by the builder.

In a departure from the harsh doctrine of caveat emptor, our Supreme Court held in Smith v. Old Warson Dev. Co., 479 S.W.2d 795, 799 (Mo.1972) (en banc), that on the basis of an implied warranty of habitability or quality, the original purchaser of a new home can recover from a builder-vendor for losses or damages resulting from latent defects in construction:

[T]he purchase of a residence is in most cases the purchase of a manufactured product--the house. The land involved is seldom the prime element in such a purchase, certainly not in the urban areas of the state. The structural quality of a house, by its very nature, is nearly impossible to determine by inspection after the house is built, since many of the most important elements of its construction are hidden from view. The ordinary "consumer" can determine little about the soundness of the construction but must rely upon the fact that the vendor-builder holds the structure out to the public as fit for use as a residence, and of being of reasonable quality (emphasis added).

Missouri courts have thus...