Frickel v. Sunnyside Enterprises, Inc.

• Decision Date: 18 September 1986
• Docket Number: No. 51614-6,51614-6
• Citation: 725 P.2d 422,106 Wn.2d 714
• Court: Washington Supreme Court
• Parties: , 55 USLW 2196 Donald FRICKEL and Eloise E. Frickel, husband and wife, Respondents, v. SUNNYSIDE ENTERPRISES, INC., a Washington corporation; Norman Harrison and Italia Harrison, husband and wife; Gino Harrison and Nancy Harrison, husband and wife; and Kenneth O. Harrison and Sheila Harrison, husband and wife; d/b/a 3H Partnership, Appellants.

Page 714

106 Wn.2d 714

725 P.2d 422, 55 USLW 2196

Donald FRICKEL and Eloise E. Frickel, husband and wife, Respondents, v. SUNNYSIDE ENTERPRISES, INC., a Washington corporation Norman Harrison and Italia Harrison, husband and wife; Gino Harrison and Nancy Harrison, husband and wife; and Kenneth O. Harrison and Sheila Harrison, husband and wife; d/b/a 3H Partnership, Appellants.

No. 51614-6.

Supreme Court of Washington En Banc.

Sept. 18, 1986.

Owens, Weaver, Davies, Mackie & Lyman, Alexander Mackie, Olympia, for appellants.

Stritmatter, Kessler & McCauley, Keith Kessler, F. Mark McCauley, Hoquiam, for respondents.

BRACHTENBACH, Justice.

The main issue is whether an implied warranty of habitability applies to the sale of an The facts are important. The plaintiffs were seeking an investment which would give them a retirement income and a tax benefit. The defendants were builders of apartment complexes for their own ownership. Defendants did not build for resale. Defendants had built over 100 apartment units, but always for their own ownership and management. These units were no exception: the defendants expected to own and manage them.

                apartment complex, under the facts of this case, and in the face of a contractual disclaimer of any such warranty.   The trial court found there was such an implied warranty and held for the buyers.   The court did not deal with the contractual disclaimer.   We accepted certification from the Court of Appeals.   We reverse
                

The defendants were approached by a realtor who represented the buyers. The property was not on the market. The buyers' agent asked the sellers--would they sell? They answered--yes, for the right price.

This establishes the first point. The property was not built for resale. The builders intended it to be held within their own inventory and management.

The apartment complex consisted of five buildings. It was built in stages. The first four buildings, containing 28 units of apartments, had been completed and occupied by tenants--some for approximately 18 months. The last building had only been framed in when the owners were approached by the buyers' agent.

The record is silent as to what negotiations, if any, went on between the sellers and buyers. A contract was prepared by an attorney. The buyers, accompanied by their own attorney, went to the office of the lawyer who had prepared the contract. Somehow the parties agreed upon a sale price of $700,000 with $85,000 down. The contract was expressly tailored to this transaction. It recognized and accounted for tenants' cleaning deposits and last month's rent deposits. It recognized that Building 5 was incomplete. It set the standards for completion as well as needed repairs to the existing buildings.

Of importance to this controversy, the contract included this clause:

The purchaser agrees that full inspection of said real estate has been made and that neither the seller nor his assigns shall be held to any covenant respecting the condition of any improvements thereon nor shall the purchaser or seller or the assigns of either be held to any covenant or agreement for alterations, improvements or repairs unless the covenant or agreement relied on is contained herein or is in writing and attached to and made a part of the contract.

Clerk's Papers, at 9. The contract further stated:

The purchaser assumes all hazards of damage to or destruction of any improvements now on said real estate

* * *

Clerk's Papers, at 10.

The sale occurred in December 1976; by 1980 some problems with outside stairways developed. By 1983, after this suit was commenced, it was learned that the foundations were inadequate and improperly designed. Apparently the problem is that the foundations were not adequately designed to accommodate the soil conditions. The seller-builders had built to the specifications of the City of Hoquiam. In fact, the City rejected the seller-builders first foundation plans. The seller-builders then built to the exact specifications of the City, even though, it turns out, those specifications did not meet the City's own building code.

The seller-builders do not challenge the trial court's findings that there were serious defects in the foundations and that improper construction has resulted in a situation where extensive repairs are necessary (at a cost of $330,000 according to the trial court) to prevent a foundation failure within 8 to 9 years. (The normal life expectancy of such buildings is 50 to 60 years.)

Two questions result. First, does a builder of an apartment complex, built not for resale, but for the seller's own inventory, guarantee to an unsolicited buyer that the buildings are so constructed that they are free from design The second question is the significance of the contractual disclaimer, an issue not addressed by the trial court.

                errors?   Put another way, does a builder who complies with the standards of the governing municipal entity, in a commercial setting, promise the buyer of those units that all of the risk of faulty construction is upon the builder?   Certainly there was no such contractual undertaking.   Indeed, the contract says otherwise.   Only if this court substitutes its judgment for that of the parties can the buyer prevail
                

The first question--i.e., the imposition of an implied warranty--is simply a matter of public policy to be determined by this court. Certainly it was not within the contemplation of the parties.

As a matter of policy, determined by this court, it seems apparent that a builder who puts a house on the market, brand-new and never occupied, has some responsibility to the ultimate buyer. The builder built the thing. It was intended to be sold to a buyer for occupancy by the buyer--not as an assemblage of concrete and pieces of wood, but as a residence. It is no different from the manufacturer of an automobile. The auto should run down the road without wheels falling off and new houses should provide habitation without foundations falling apart. This court and other courts have recognized this principle. See, e.g., House v. Thornton, 76 Wash.2d 428, 457 P.2d 199 (1969); Yepsen v. Burgess, 269 Or. 635, 525 P.2d 1019 (1974); Tavares v. Horstman, 542 P.2d 1275 (Wyo.1975); Petersen v. Hubschman Constr. Co., 76 Ill.2d 31, 27 Ill.Dec. 746, 389 N.E.2d 1154 (1979); Dixon v. Mountain City Constr. Co., 632 S.W.2d 538 (Tenn.1982). See, generally, Annot., Liability of Builder-Vendor or other Vendor of New Dwelling for Loss, Injury, or Damage Occasioned by Defective Condition Thereof, 25 A.L.R.3d 383 (1969) and cases cited therein.

Thus, in House v. Thornton, supra, we held that the sale of a new house by a vendor-builder to the first intended occupant carries with it an implied warranty "that the foundations supporting it are firm and secure and that the The reach of this implied warranty was clarified but not extended in Klos v. Gockel, 87 Wash.2d 567, 554 P.2d 1349 (1976), which involved the warranty liability of an occasional builder of houses who built the house at issue primarily for her own personal use rather than for purposes of resale and sold it to the plaintiff-buyers after living in it for a year. In finding no liability under the rule of House v. Thornton, supra, we made it clear that an implied warranty of habitability or fitness does not apply to every sale of a new house. The sale must be "commercial rather than casual or personal in nature." Klos v. Gockel, supra at 570, 554 P.2d 1349. In other words, the warranty only applies where the new dwelling is built for purposes of sale by a builder-vendor in the business of building such dwellings. Klos v. Gockel, supra. See, e.g., Kirk v. Ridgway, 373 N.W.2d 491 (Iowa 1985); Dixon v. Mountain City Constr. Co., supra at 540; Bolkum v. Staab, 133 Vt. 467, 346 A.2d 210 (1975).

                house is structurally safe for the buyer's intended purpose of living in it."  76 Wash.2d at 436, 457 P.2d 199.   There, the vendor-builders, a real estate broker and a building contractor, constructed a residence for purposes of sale.   The buyers, a husband and wife, purchased the "brand new house" with the intention of making it their family home.   In time, however, the house proved to have structural defects which rendered it unfit for further occupancy.   In imposing an implied warranty of habitability or fitness upon the vendor-builders, this court, in effect, "did no more than apply a rule of common sense to the kind of transaction that recurs perhaps more than a million times annually in the country--the purchase of a brand new house."   Berg v. Stromme, 79 Wash.2d 184, 196, 484 P.2d 380 (1971), discussing House v. Thornton, supra (same rationale used for adoption of implied warranty in sale of brand new automobiles)
                

It is clear that the facts of this case do not come within the implied warranty doctrine as fashioned by this court in House v. Thornton, supra and Klos v. Gockel, supra. Unlike the sale of a house--brand new and never Moreover, we are not persuaded that the implied warranty of habitability should be extended, as a matter of public policy, to the sale of property under the facts and circumstances of this case. The implied warranty of habitability or fitness is based upon judicial recognition that the rule of caveat emptor--premised as it is on an arm's length transaction between buyers and sellers of comparable skill and experience--has little relevance when applied to the sale of new homes in today's market. See, e.g., House v. Thornton, supra 76 Wash.2d at 435-36, 457 P.2d 199; Tavares v. Horstman, supra at 1282; Yepsen v. Burgess, supra 269 Or. at 639-40, 525 P.2d 1019. The necessity of imposing an implied warranty upon builder-vendors of new houses, as a matter of public policy, to protect the ordinary purchasers of such homes was well-stated by the Illinois Supreme Court in Petersen v. Hubschman Constr. Co., supra.

                occupied--to its first intended occupant, the sale here involved the

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