Flom v. Stahly

• Decision Date: 17 September 1997
• Docket Number: No. 96-221,96-221
• Citation: 569 N.W.2d 135
• Parties: Douglas E. FLOM and Linda A. Flom, Appellees, v. Thomas L. STAHLY and Kathleen E. Stahly, Appellants.
• Court: Iowa Supreme Court

Page 135

569 N.W.2d 135

Douglas E. FLOM and Linda A. Flom, Appellees, v. Thomas L. STAHLY and Kathleen E. Stahly, Appellants.

No. 96-221.

Supreme Court of Iowa.

Sept. 17, 1997.

Steven J. Andreasen of Gildemeister, Willia & Keane, Sioux City, for appellants.

Michael W. Ellwanger of Rawlings, Nieland, Probasco, Killinger, Ellwanger, Jacobs & Mohrhauser, Sioux City, for appellees.

Considered by McGIVERIN, C.J., and HARRIS, LARSON, LAVORATO, and SNELL, JJ.

McGIVERIN, Chief Justice.

This controversy revolves around alleged defects in a Plymouth County house sold by defendants Thomas L. Stahly and Kathleen E. Stahly to plaintiffs Douglas E. Flom and Linda A. Flom.

In defendants' appeal we must determine whether, in a judgment awarding damages to plaintiffs for defendants' alleged breach of express warranty, the district court erred in: (1) finding a breach of express warranty in connection with defendants' sale of real estate to plaintiffs; (2) finding that the alleged breach proximately caused the damages alleged by plaintiffs; (3) concluding that the comparative fault doctrine did not apply in this situation; and (4) finding plaintiffs proved the amount of damages.

We also must decide, on plaintiffs' cross-appeal, whether the court erred in: (1) failing to apply the theory of implied warranty; (2) precluding testimony of a witness for plaintiffs; and (3) refusing to award prefiling interest.

We conclude that the district court committed no reversible error and thus affirm its judgment.

I. Background facts and proceedings. In 1981 Thomas Stahly, a physician, began constructing a large southwestern-style adobe home on an eighty-acre parcel of land he and his wife, Kathleen, had purchased in 1979. The Stahlys planned to live in the house with their five children. Although Dr. Stahly had an interest in southwestern-style architecture and had read extensively on the subject, he had no previous construction training or experience. According to Dr. Stahly, the construction of the house was his "new hobby" and an "experiment." Dr. Stahly did much of the construction himself but hired craftspeople and laborers for some of the work on the home. The Stahlys moved to West Virginia in 1982, before the house was completed, but returned to Plymouth County for a few weeks each year to continue working on the house. The house was otherwise unoccupied.

In April 1991, Douglas Flom, a Sioux City attorney, and his wife, Linda, saw a newspaper advertisement regarding the house and became interested in the property. After the Floms made an initial visit to the house with a friend of the Stahlys, the Stahlys wrote to Floms and enclosed written materials about the house. These written materials described various aspects of the house and included the following statements regarding the exterior walls and heating system: "The whole outside wall is actually stuccoed double block walls" and "[r]ound, graded insulated [heating] ducts were placed under the floors and 2 to 4 inches of concrete poured around these ducts when the floors were poured." The written materials indicated that the house was approximately 85% finished.

The Floms also visited the property several times while the Stahlys were present. Dr. Stahly walked through the house with Douglas Flom, pointing out certain features and describing some problems he had encountered during his construction of the house. Dr. Stahly gave the Floms numerous photographic slides which showed different stages of the construction.

In addition to their own visits, the Floms had eight or nine construction professionals inspect accessible areas of the house. As a result, the Stahlys subtracted $5,000 from the purchase price because of discovered electrical problems. Based on the opinions of the inspectors, the Floms estimated it would cost $75,000--$100,000 to finish the house, although one inspector felt it would cost $250,000 to complete the project.

In May 1991 the Stahlys and Floms executed a written contract for the purchase by Floms of the home and 23 acres of land. The Floms received, and later exercised, an option to purchase the remaining 57 acres. The total purchase price for the house and acreage was $255,000, with a down payment of $110,000 and the remainder payable in installments. At Douglas Flom's insistence, the written materials earlier given to the Floms by the Stahlys were incorporated by reference into the contract. Accordingly, the contract contained the following paragraph:

Except for representations made in written materials provided to Buyers by Sellers and except for representations made in this offer to buy, Buyers are purchasing the premises solely based on Buyers' own inspection and not on any statements or representations made by Sellers.

The Stahlys were represented by counsel during the contract negotiations.

The Floms took possession of the property in June 1991 and undertook the completion of the house. Although they initially relied on their own and hired labor, they eventually hired a general contractor for the project. In the course of the work, a foreman found extensive areas of rotten wood and structural unsoundness along portions of exterior walls and support beams leading therefrom. The following areas needed repair: the south bedroom wall, front porch roof, kitchen porch roof, north wall, cheater window wall, and greenhouse. In addition, the ducts used for the subsurface heating system had disintegrated, allowing debris into the system. The Floms informed the Stahlys of the problems and had Floms' contractor remedy the several defects and the heating system.

Because the amount expended by the Floms on repairs exceeded the balance due on the Floms' indebtedness to the Stahlys, the Floms discontinued their installment payments and requested that the Stahlys release them from their outstanding obligation. After the Stahlys served the Floms with a notice to cure the delinquency, the Floms brought their payments up to date. At the time of trial, the balance due under the contract to Stahlys was $130,000.

In December 1994 the Floms filed a petition in district court against defendants Stahly alleging breach of express warranty in the contract, breach of implied warranty, negligent misrepresentation, and negligent construction. The Stahlys answered and asserted affirmative defenses of comparative negligence by Floms and assumption of risk.

The law action proceeded to a bench trial. Expert witnesses for the Floms testified that the problem of rotting wood in the house was caused by improper construction of the walls. They stated that stucco plaster had been applied directly to plywood on the south wall of the house without an intervening moisture barrier. As a result, moisture could be absorbed through the stucco plaster, which is porous, and into the wood, causing seepage into other beams and supports and major structural problems. According to these witnesses, the use of plywood on the south wall did not conform to the statement in the Stahlys' written materials that the entire outside wall was stuccoed double block walls. Experts testified that the decay of the ductwork for the heating system was caused by the failure to encase the paper-based ducts in concrete, contrary to the assertion made by the Stahlys in the written materials.

Finding that the statements in the Stahlys' written materials constituted express warranties incorporated into the sale contract, the trial court determined that the Floms were entitled to recover damages of approximately $130,000 from the Stahlys for breach of express warranty. The court rejected the Floms' theories of implied warranty, negligent misrepresentation, and negligent construction and found there was no authority for the Stahlys' affirmative defenses of comparative fault by Floms or assumption of risk. The court based the amount of damages on the costs of repairing various components of the house that were covered by the express warranties.

In response to post-trial motions filed by the parties, the trial court rejected the Floms' request for prejudgment interest and expanded its findings to specify that the photographic slides were not a part of the contract between the Floms and Stahlys.

Defendants Stahly appealed, and plaintiffs Flom cross-appealed.

II. Standard of review. Our review in this law action is for correction of errors at law. Iowa R.App. P. 4. We are bound by the district court's findings of fact if they are supported by substantial evidence. Iowa R.App. P. 14(f)(1).

III. Award of damages to plaintiffs. On appeal, defendants Stahly contend the trial court's award of damages to plaintiffs Flom was improper because the court erred in: (1) finding the Stahlys breached an express warranty; (2) finding any breach proximately caused the damages alleged; (3) concluding the comparative fault doctrine did not apply here; and (4) finding the Floms proved the amount of damages. We now turn to those arguments.

A. Breach of express warranty. The Stahlys' challenge to the court's finding of a breach of express warranty in the contract is twofold. First, they argue that the theory of express warranty does not apply to the sale of realty. Second, the Stahlys assert that even if such a theory does apply to the sale of realty, the contract between the Stahlys and the Floms did not contain any express warranties.

1. Defendants Stahly point out that Iowa Code section 554.2313 (1991), which governs express warranties, applies to the sale of goods but not to the sale of realty. Thus, they argue that any authority for applying the theory of express warranty to real estate must come from common law. We find such authority in case law from Iowa and other jurisdictions.

In an early case, we upheld the trial court's finding that a seller's express warranty of "choice, well lying, good soil, and in every respect first-class, tillable farm land" had been breached in a contract action. Swayne v. Waldo, 73...