Cosmopolitan Homes, Inc. v. Weller, 80SC260

• Decision Date: 23 May 1983
• Docket Number: No. 80SC260,80SC260
• Citation: 663 P.2d 1041
• Parties: COSMOPOLITAN HOMES, INC.; Hutchinson Construction Company; and Builders Research & Engineering Co., Petitioners, v. William E. WELLER and Shirley Mae Weller, Respondents.
• Court: Colorado Supreme Court

Page 1041

663 P.2d 1041

COSMOPOLITAN HOMES, INC.; Hutchinson Construction Company and Builders Research & Engineering Co., Petitioners, v. William E. WELLER and Shirley Mae Weller, Respondents.

No. 80SC260.

Supreme Court of Colorado En Banc.

May 23, 1983.

Calkins, Kramer, Grimshaw & Harring, Richard L. Harring, Denver, for petitioners.

Omer Griffin, Denver, for respondents.

DUBOFSKY, Justice.

We granted certiorari to review the Court of Appeals' holding in Weller v. Cosmopolitan Homes, Inc., 44 Colo.App. 470, 622 P.2d 577 (Colo.App.1980) which allowed subsequent purchasers of a home to assert a claim for property damage to the structure allegedly caused by the negligence of the homebuilder. We affirm the judgment of the Court of Appeals but limit the negligence claim to latent defects which the purchaser was unable to discover prior to purchase.

The plaintiffs, Shirley Mae Weller and William S. Weller, are the fourth owners of a house designed, built and sold in 1973 by the defendants Cosmopolitan Homes, Inc., Hutchinson Construction Company, and Builders' Research Engineering Company (the builders). Although the Wellers seek to recover for deficiencies in workmanship, design and materials in the house attributable to negligent design and construction by the defendants, the facts alleged in the complaint relate to cracking in the foundation from movement or settling of the house which had not occurred at the time the Wellers made their purchase on January 4, 1977.

The district court dismissed the Wellers' complaint on the ground that there was no privity of contract between the defendants and the Wellers because the Wellers were not the first purchasers or users of the house, and therefore the defendants did not owe the Wellers a duty of reasonable care. The Court of Appeals reversed the district court ruling, holding that regardless of lack of privity of contract, the purchaser of a used home may recover for property damage caused by the negligence of the builder.

On certiorari review, the defendants argue that a claim for negligence against a builder is indistinguishable as a matter of proof from a claim of breach of implied warranty of habitability. ¹ The defendants therefore assert that the builder should not be held liable in a negligence action brought by a subsequent purchaser because case law in Colorado has limited an implied warranty's protection to first purchasers. We disagree with the defendants' assertion. An obligation to act without negligence in the construction of a home is independent of contractual obligations such as an implied warranty of habitability. Our cases allow a subsequent home owner to maintain an action against a builder for negligence resulting in latent defects which the subsequent purchaser was unable to discover prior to purchase if the action is filed within the statute of limitations set out in section 13-80-127, C.R.S.1973 (1982 Supp.).

I.

This Court defined an implied warranty of fitness and habitability for purchasers of new homes in Carpenter v. Donohoe, 154 Colo. 78, 388 P.2d 399, 401-402 (1964):

An action for damages for breach of warranty, whether express or implied, involves the relations between the parties arising out of contract.... There is an implied warranty that builder-vendors have complied with the building code of the area in which the structure is located. Where, as here, a home is a subject of sale, there are implied warranties that the home was built in a workmanlike manner and is suitable for habitation.

We have limited the class of purchasers entitled to the contractual protection of the implied warranty to first purchasers. See, e.g., H.B. Bolas Enterprises, Inc. v. Zarlengo, 156 Colo. 530, 400 P.2d 447 (1965); Gallegos v. Graff, 32 Colo.App. 213, 508 P.2d 798 (1973). ²

However, the "contractual obligation is not the touchstone of civil liability in tort. It is only the matrix from which an independent tort obligation may arise." Metropolitan Gas Repair Service, Inc. v. Kulik, 621 P.2d 313 (Colo.1980). A contractual obligation gives rise to a common law duty to perform the work subject to the contract with reasonable care and skill. Id.; Lembke Plumbing and Heating v. Hayutin, 148 Colo. 334, 366 P.2d 673 (1961). The fact that a contract may have existed between a builder and the original purchaser of the home does not transform the builder's contractual obligation into the measure of its tort liability arising out of its contractual performance. Metropolitan Gas Repair Service, Inc. v. Kulik, supra; Lembke Plumbing and Heating v. Hayutin, supra; Wright v. Creative Corp., 30 Colo.App. 575, 498 P.2d 1179 (1972). Metropolitan Gas involved the duty of a heating contractor to exercise reasonable care and skill in the installation of a new part in a heating system, including a safety inspection of the boiler, and Lembke Plumbing concerned the failure of a plumbing contractor to exercise reasonable care and skill in the installation of a plumbing system in a new house, resulting in structural damage. ³ The principle enunciated in both cases--that a negligence claim, not limited by privity of contract, may lie against a contractor--requires a builder to use reasonable care in the construction of a home in light of the apparent risk. Metropolitan Gas Repair Service, Inc. v. Kulik, supra; W. Prosser, The Law of Torts § 53 (4th ed. 1971). ⁴

The apparent risk encompasses one who foreseeably suffers personal injury as a consequence of builder or contractor negligence. In DeCaire v. Public Service Company, 173 Colo. 402, 479 P.2d 964 (1971), subsequent purchasers of a house had a negligence claim against the gas company for failure to exercise due care in servicing the furnace system, resulting in personal injury and death from carbon monoxide poisoning. In Wright v. Creative Corp., supra, a subsequent purchaser could recover for injuries suffered by his minor child who ran into a negligently installed sliding glass door. The question remaining for us to decide in this case is whether a subsequent purchaser can state a claim against a builder for latent defects in a residence caused by the builder's negligence. ⁵

II.

A number of cases from other jurisdictions allow a subsequent purchaser to state a claim against a builder for negligence in the construction of a home: Coburn v. Lennox Homes, Inc., 173 Conn. 567, 378 A.2d 599 (1977) (subsequent purchasers may state a claim in negligence for latent defects, although the implied warranty does not extend to them); Terlinde v. Neeley, 275 S.C. 395, 271 S.E.2d 768 (S.C.1980) (subsequent purchasers may bring claims for latent defects under either implied warranty or negligence theories); Brown v. Fowler, 279 N.W.2d 907 (S.D.1979) (subsequent purchasers may state a claim for negligence against a builder, although implied warranties do not extend beyond the first purchaser); Moxley v. Larimee Builders, Inc., 600 P.2d 733 (Wyo.1979) (subsequent purchasers may sue for breach of implied warranty as well as state a claim in negligence). See Simmons v. Owens, 363 So.2d 142 (Fla.Dist.Ct.App.1978); McDonough v. Whalen, 365 Mass. 506, 313 N.E.2d 435 (1974); Steinberg v. Coda Roberson Construction Company, 79 N.M. 123, 440 P.2d 798 (1968) Comment, Builders' Liability for Latent Defects in Used Homes, 32 Stanford L.Rev. 607 (1980); Liability for Soil Problems in Residential Construction, 7 Colorado Lawyer No. 8 at 1311-1320 (August 1978). See also Elden v. Simmons, 631 P.2d 739 (Okl.1981) and Barnes v. Mac Brown and Company, Inc., 264 Ind. 227, 342 N.E.2d 619 (Ind.1976) (extending implied warranty of habitability to subsequent purchasers).

At least two states have refused to extend the negligence cause of action to subsequent purchasers. Redarowicz v. Ohlendorf, 92 Ill.2d 171, 65 Ill.Dec. 411, 441 N.E.2d 324 (1982) (refusing to extend negligence claim to subsequent purchasers on the basis that a plaintiff cannot recover solely economic losses in tort, but extending implied warranty of habitability to subsequent purchasers); Crowder v. Vandendeale, 564 S.W.2d 879, 881 (Mo.1978) ("liability imposed for mere deterioration on or loss of bargain resulting from latent structural defects is contractual"). The results in both Illinois and Missouri turn on case law in each jurisdiction which prevents recovery in tort for economic loss. Colorado precedent is not so limited. Tamblyn v. Mickey & Fox, Inc., 195 Colo. 354, 578 P.2d 641 (1978); Lembke Plumbing and Heating, supra; see also Sabella v. Wisler, 59 Cal.2d 21, 27 Cal.Rptr. 689, 377 P.2d 889 (1963).

The policy supporting the extension of the negligence remedy to a subsequent purchaser is based on many of the reasons for implying a warranty of habitability to the first purchaser. In Duncan v. Schuster-Graham Homes, Inc., 194 Colo. 441, 578 P.2d 637 (1978), we described the purpose of the implied warranty of habitability as affording

home buyers protection from overreaching by comparatively more knowledgeable builder-vendors. An experienced builder who has erected and sold many houses is in a far better position to determine the structural condition of a house than most buyers. Even if a buyer is sufficiently knowledgeable to evaluate a home's condition, he rarely has access to make any inspection of the underlying structural work, as distinguished from the merely cosmetic features.

578 P.2d at 638-639. As the court noted in Simmons v. Owens, supra, 363 So.2d at 143:

The ordinary purchaser of a home is not qualified to determine when or where a defect exists. Yet, the purchaser makes the biggest and most important investment in his or her life and, more times than not, on a limited budget. The purchaser can ill afford to suddenly find a latent defect in his or her home that completely destroys the family's budget and have no remedy for recourse....

Moreover, given the mobility of most potential home owners, it is foreseeable that a house will be sold to...