Ellis v. Robert C. Morris, Inc.

• Citation: 513 A.2d 951,128 N.H. 358
• Decision Date: 29 July 1986
• Docket Number: No. 85-121,85-121
• Parties: Joseph M. ELLIS and Donna Ellis v. ROBERT C. MORRIS, INC.
• Court: New Hampshire Supreme Court

Page 951

513 A.2d 951

128 N.H. 358

Joseph M. ELLIS and Donna Ellis v. ROBERT C. MORRIS, INC.

No. 85-121.

Supreme Court of New Hampshire.

July 29, 1986.

Davis, Braucher & Kowal, Boston, Mass. and Wadleigh, Starr, Peters, Dunn & Chiesa, Manchester (Richard W. Schwartzman, on brief and orally), for plaintiffs.

Runyon and Sweeney P.A., Peterborough (Walter H. Sweeney, on brief and orally), for defendant.

Craig, Wenners & McDowell, Manchester (James W. Craig, on brief and orally), for the Association of New Hampshire Homebuilders, as amicus curiae.

KING, Chief Justice.

This appeal arises from an order of the Trial Court (Wyman, J.) granting the defendant's motion for summary judgment. The issue presented is whether a subsequent purchaser of a home may sue the builder for damages based on the builder's negligent performance of the original construction contract. We hold that a builder has no tort obligation to subsequent purchasers of a house to prevent economic harm resulting from defects in the house. A purchaser's action for damages for the cost of remedying defects sounds in contract; accordingly, in the absence of privity of contract between the purchaser and the builder, no action can be maintained.

In 1978, the defendant completed construction of a single family residence in Peterborough. The clapboards installed on the house were selected by Dennis Balog, the original owner. Balog took possession of the house in January 1978 but sold the house to his employer before the year's end. His employer in turn sold the house to the plaintiffs in February 1979. The contract between the seller and the plaintiffs provided that the "purchasers agree to accept the premises ... in 'as is' condition."

The plaintiffs took possession of the house in February 1979. Thereafter, they observed that the clapboards were warping and cracking. The plaintiffs complained to the defendant, but the defendant refused to repair the siding. The plaintiffs then hired another contractor to replace the clapboards and in March 1983 instituted this action, alleging that the clapboards were defective and that the defendant had failed to install them in a workmanlike manner.

The complaint may be read as raising both a claim in contract, for breach of implied warranty of habitability, and a claim in tort, for negligence. At oral argument, the plaintiffs waived the implied warranty issue, acknowledging that there was no privity of contract between themselves and the defendant. They contend, however, that the lack of privity should not bar their negligence action. According to the plaintiffs, a subsequent homeowner is entitled to the same protection as the original purchaser of a house because latent defects, such as defective clapboards, should be known to the builders who handle the materials but are difficult for potential purchasers to detect. Thus, they conclude, the defendant contractor had a duty of ordinary care to all foreseeable parties, including subsequent purchasers of the house, to ensure that the clapboards were properly installed and were not defective.

In their brief, the plaintiffs rely almost exclusively on cases from other jurisdictions that extend an implied warranty of habitability to subsequent purchasers, see, e.g., Richards v. Powercraft Homes, Inc., 139 Ariz. 242, 678 P.2d 427 (1984), or permit a subsequent purchaser to sue the builder for negligent performance of the original construction contract that results in defects latent at the time of purchase, see, e.g., Cosmopolitan Homes, Inc. v. Weller, 663 P.2d 1041 (Colo.1983). See generally Annot., 10 A.L.R. 4th 385 (1981). These courts have been motivated in large part by two policy considerations. First, neither the initial nor the subsequent purchaser can effectively inspect the underlying construction or discover latent defects before purchase. Second, in an increasingly mobile society, builders can reasonably foresee frequent changes in home ownership. See, e.g., Cosmopolitan Homes, supra at 1045. Accordingly, courts have sought to rectify the perceived unfairness that arises when a subsequent homeowner, deemed no less worthy of protection than the initial purchaser, is denied recovery because of the lack of privity of contract with the builder.

Although we are cognizant of the problems a subsequent homeowner may face, we decline to follow the example of these cases and thereby depart from the traditional principles upon which contract and tort actions are predicated. Two decisions from other jurisdictions are instructive in this regard. In Redarowicz v. Ohlendorf, 92 Ill.2d 171, 65 Ill.Dec. 411, 441 N.E.2d 324 (1982), the plaintiff, a subsequent purchaser of a home, alleged that the chimney and adjoining brick wall were separating from the house and that the basement wall was cracked. The Supreme Court of Illinois permitted the plaintiff to sue the builder for breach of implied warranty of habitability and fitness, stating:

"The warranty of habitability is a creature of public policy. It is a judicial innovation that has evolved to protect purchasers of new houses upon discovery of latent defects in their homes. While the warranty of habitability has roots in the execution of the contract for sale, we emphasize that it exists independently. Privity of contract is not required."

Id. at 183, 65 Ill.Dec. at 417, 441 N.E.2d at 330 (citations omitted); cf. Woodward v. Chirco Const. Co., Inc., 141 Ariz. 514, 687 P.2d 1269 (1984) (stating that the imposition by law of an implied warranty of habitability did not transform the duty arising out of the contract into one based on tort principles alone, but that privity of contract was not required to maintain the action).

We agree with the dissenting justice in Redarowicz, who stated that allowing an action for breach of implied warranty in the absence of privity of contract was tantamount to imposing strict liability in tort. 92 Ill.2d at 187, 65 Ill.Dec. at 418-19, 441 N.E.2d at 331-32 (Ryan, C.J., dissenting). Under New Hampshire law, an implied warranty of habitability runs from the builder to the first owner of a residence. See Norton v. Burleaud, 115 N.H. 435, 436, 342 A.2d 629, 630 (1975). Implied warranties, however, "are imposed only in favor of a party to whom the defendant has already manifested an intent to be bound." Note, Economic Loss in Products Liability Jurisprudence, 66 Colum.L.Rev. 917, 948 (1966). Warranty liability is "an incident to the core of consent--the contract itself." Id. at 949. It remains a matter of contract and, as such, is subject to the requirement of privity. See Elliott v. Lachance, 109 N.H. 481, 484, 256 A.2d 153, 155 (1969).

Plaintiffs who lack privity of contract but would otherwise have a claim for implied warranty may under certain limited circumstances sue under a theory of strict liability in tort. See Elliott supra. We have recently emphasized that only the user or consumer of an unreasonably dangerous product, for whom proof of negligence would be practically impossible, may proceed on a theory of strict liability. See Bagley v. Controlled Environment Corp., 127 N.H. 556, ---, 503 A.2d 823, 825-26 (1986). Because a homebuyer ordinarily would not have that degree of difficulty proving negligence on the part of the builder, we decline to extend the remedy. Accordingly, a subsequent purchaser cannot sue for breach of implied warranty in the absence of privity of contract with the builder.

The second case we consider is Cosmopolitan Homes, Inc. v. Weller, 663 P.2d 1041 (Colo.1983). In Cosmopolitan Homes, the plaintiffs were the fourth owners of a house built by the defendants in 1973. After the plaintiffs bought the house in 1977, the foundation began to crack, and the plaintiffs sued the builders for negligence. The Supreme Court of Colorado stated that the absence of privity of contract between the plaintiffs and the builders did not bar the negligence claim:

"[T]he 'contractual obligation is not the touchstone of civil liability in tort. It is only the matrix from which an independent tort obligation may arise.' A contractual obligation gives rise to a common law duty to perform the work subject to the contract with reasonable care and skill. The fact that a contract may have existed between the 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."

Id. at 1043 (citations omitted). The court concluded that foreseeability determined the scope of the duty owed and that the builders owed a duty to the plaintiffs to prevent defects in workmanship such as structural deficiencies. Id. at 1045.

We agree that the absence of privity of contract does not necessarily bar a negligence action that arises from improper performance of a contract. See Robinson v. Colebrook Savings Bank, 109 N.H. 382, 384-85, 254 A.2d 837, 839 (1969). But we disagree with the conclusion of the Supreme Court of Colorado that the builders' contractual duty to give the homebuyers the benefit of their bargain is also a tort obligation owed the buyers, namely, a duty to exercise care in building the house so that no defects exist. See Cosmopolitan Homes, 663 P.2d at 1050 (Rovira, J., dissenting). Facts constituting a breach of contract may also constitute a breach of a duty owed by the defendant to the plaintiff independent of the contract. Lawton v. Great Southwest Ins. Co., 118 N.H. 607, 613, 392 A.2d 576, 580 (1978); Dunn & Sons, Inc. v. Paragon Homes of New Eng., Inc., 110 N.H. 215, 217, 265 A.2d 5, 8 (1970). Yet "a breach of contract standing alone does not give rise to a tort action." Lawton supra. Thus, where improper conduct in the performance of a contract is alleged, it is necessary to identify whether the plaintiff has an interest protected by tort law or one enforceable only in contract.

In support of the proposition that a builder has a tort duty...