Gaito v. Auman

• Decision Date: 02 April 1985
• Docket Number: No. 529A84,529A84
• Citation: 327 S.E.2d 870,313 N.C. 243
• Parties: Sam GAITO and wife, Eleanor H. Gaito v. Howard Frank AUMAN, Jr. v. Alvin LeGRAND, individually and d/b/a Alvin LeGrand Plumbing and Heating.
• Court: North Carolina Supreme Court

Page 870

327 S.E.2d 870

313 N.C. 243

Sam GAITO and wife, Eleanor H. Gaito v. Howard Frank AUMAN, Jr. v. Alvin LeGRAND, individually and d/b/a Alvin LeGrand Plumbing and Heating.

No. 529A84.

Supreme Court of North Carolina.

April 2, 1985.

Pollock, Fullenwider, Cunningham & Patterson, P.A. by Bruce T. Cunningham, Jr., Southern Pines, for plaintiffs-appellees.

Brown, Holshouser, Pate & Burke by G. Les Burke, Southern Pines, for defendant-appellant.

BRANCH, Chief Justice.

The question posed by this appeal is whether the Court of Appeals erred in affirming the judgment in favor of the plaintiffs on a theory of implied warranty of habitability. The majority concluded that a residential structure could be considered new for purposes of the implied warranty within the maximum applicable statute of limitations period. We reject this reasoning.

Although the majority opinion did not address the procedural posture of the questions before it, we note that the defendant builder's claim is that the trial court erred in denying his motions for summary judgment, directed verdict and judgment notwithstanding the verdict. Upon a motion for summary judgment the burden is on the moving party to establish that there is no triable issue of fact and that he is entitled to judgment as a matter of law. Page v. Sloan, 281 N.C. 697, 190 S.E.2d 189 (1972). The test is whether the moving party presents materials that would require a directed verdict in his favor if offered at trial. Coakley v. Ford Motor Co., 11 N.C.App. 636, 182 S.E.2d 260, cert. denied, 279 N.C. 393, 183 S.E.2d 244 (1971).

Where a motion for directed verdict is made at the conclusion of the plaintiff's evidence, the trial court must determine whether the evidence, taken in the light most favorable to the plaintiff, was sufficient to submit the case to the jury. Kelly v. International Harvester Co., 278 N.C. 153, 179 S.E.2d 396 (1971). Like the motion for directed verdict, the motion for judgment notwithstanding the verdict tests the legal sufficiency of the evidence to take the case to the jury and support the verdict for the plaintiff. See Snider v. Dickens, 293 N.C. 356, 237 S.E.2d 832 (1977).

The essence of defendant's arguments, however, is that plaintiffs' claim was not cognizable under an implied warranty theory because of the age of the house and its occupation by tenants prior to its purchase by the plaintiffs. Although we held in Griffin v. Wheeler-Leonard & Co., 290 N.C. 185, 225 S.E.2d 557 (1976), that the implied warranty of habitability arises by operation of law, we hold that the applicability of the warranty is to be determined on a case by case basis and that under these facts, plaintiffs presented a legally cognizable claim under a theory of implied warranty of habitability.

The trend of recent judicial decisions has been to invoke the doctrine of implied warranty of habitability or fitness in cases involving the sale of a new house by the builder. See Humber v. Morton, 426 S.W.2d 554 (Tex.1968); Annot., 25 A.L.R.3d 372 (1969). The rigid common law rule of caveat emptor in the sale of recently completed dwellings was relaxed in this state by this Court's opinion in Hartley v. Ballou, 286 N.C. 51, 209 S.E.2d 776 (1974). In Hartley the plaintiffs purchased a "recently" constructed house from defendants. Although they inspected the house prior to moving in, plaintiffs observed nothing amiss. Shortly after moving in the house showed signs of substantial water leakage and insufficient waterproofing in the basement. This Court, in an opinion authored by Chief Justice Bobbitt, concluded that the defendant builder-vendor had an obligation to perform work in a proper, workmanlike and ordinarily skillful manner. Chief Justice Bobbitt then stated the rule as follows:

[I]n every contract for the sale of a recently completed dwelling, and in every contract for the sale of a dwelling then under construction, the vendor, if he be in the business of building such dwellings, shall be held to impliedly warrant to the initial vendee that, at the time of the passing of the deed or the taking of possession by the initial vendee (whichever first occurs), the dwelling, together with all its fixtures, is sufficiently free from major structural defects, and is constructed in a workmanlike manner, so as to meet the standard of workmanlike quality then prevailing at the time and place of construction; and that this implied warranty in the contract of sale survives the passing of the deed or the taking of possession by the initial vendee.

Id. at 62, 209 S.E.2d at 783.

The doctrine recited in Hartley is known as an implied warranty of habitability and represents a growing trend in the jurisprudence of our states. An implied warranty of habitability is limited to latent defects--those not visible or apparent to a reasonable person upon inspection of a dwelling. Griffin v. Wheeler-Leonard and Co., 290 N.C. 185, 225 S.E.2d 557 (1976) (defect was poor waterproofing which caused standing water in crawl space).

The relaxing of the rigid rule of caveat emptor in Hartley is based on a policy which holds builder-vendors accountable beyond the passage of title or the taking of possession by the initial vendee for defects which are not apparent to the purchaser at that time. This policy is justified because the innocent purchaser is often making one of the largest investments of a lifetime from one whose experience and expertise places him in a dominating position in that sale. See Bethlahmy v. Bechtel, 91 Idaho 55, 415 P.2d 698 (1966); 25 A.L.R. at 391.

Defendant appellant argues that the facts of this case are legally insufficient to support a verdict for the plaintiff because the facts do not fall within the exception to the rule of caveat emptor established by Hartley. Defendant contends that an implied warranty of habitability is inapplicable because both the pretrial pleadings and evidence at trial show that the house was not "recently completed" or under construction at the time of the passing of the deed; the plaintiff claims and the evidence shows instead that the house was built four and one-half years earlier. Defendant also argues that the previous occupancy by tenants invalidated any implied warranty which may have arisen.

We first consider defendant's argument that he must prevail because the house was built four and one-half years before the plaintiffs received a deed or took possession. Our cases do not address the precise limits of our requirement in Hartley that a house be "recently completed." We therefore turn to other jurisdictions for instruction on this question.

A number of courts have established a standard of reasonableness in determining how the age of a house affects the application of the warranty. See Sims v. Lewis, 374 So.2d 298 (Ala.1979); Barnes v. Mac Brown and Co., 264 Ind. 227, 342 N.E.2d 619 (1976); Smith v. Old Warson Development, Co., 479 S.W.2d 795 (Mo.1972); Padula v. J.J. Deb-Cin Homes, Inc., 111 R.I. 29, 298 A.2d 529 (1973); Waggoner v. Midwestern Development, Inc., 83 S.D. 57, 154 N.W.2d 803 (1967).

In Barnes the plaintiffs in 1971 purchased a home which had been completed in 1967 and had been sold to an intermediate purchaser. After plaintiffs moved in, a large crack appeared in a wall, and the plaintiffs discovered that the basement leaked. In considering the question of the applicability of an implied warranty of habitability, the Indiana Supreme Court applied a reasonableness standard:

This extension of liability is limited to latent defects not discoverable by a subsequent purchaser's reasonable inspection, manifesting themselves after the purchase. The standard to be applied in determining whether or not there has been a breach of warranty is one of reasonableness in light of the surrounding circumstances. The age of the home, its maintenance, the use to which it has been put are but a few factors entering into this factual determination at trial.

342 N.E.2d at 621.

In a subsequent case, the Indiana Court of Appeals considered whether the warranty extended to a defective septic tank in which the defect appeared five years after the completion of the dwelling. Relying on Barnes and the reasonableness standard, the court stated that where a defective septic tank was involved "we cannot say, as a matter of law, that five years is too long a period of time to extend the implied warranty of fitness." Wagner Construction Co. v. Noonan, 403 N.E.2d 1144 (Ind.App.1980).

In a case decided by the Washington Supreme Court, Klos v. Gockel, 87 Wash.2d 567, 554 P.2d 1349 (1976), plaintiffs purchased a home in 1973 which had been completed in July 1972. The builder-vendor had lived in the house approximately one year before plaintiffs purchased it. After plaintiffs moved in, a portion of the slope below the rear wall of the house slid, causing the patio to crack and patio slabs to upend. Although the Court in Klos rejected the applicability of the warranty on other grounds, it reasoned that the passage of a year would not necessarily invalidate a warranty of habitability.

It is true that for purposes of warranty liability, the house purchased must be a "new house", but this is a question of fact. The passage of time can always operate to cancel liability but just how much time need pass varies with each case.

87 Wash.2d at 571, 554 P.2d at 1352. See also Tavares v. Horstman, 542 P.2d 1275 (Wyo.1975) (warranty applied where septic tank failed after five years because "we appreciate that different parts of construction may have different expected life").

We are persuaded that the reasoning of these courts is sound and that the standard of reasonableness is the appropriate standard for determining whether a dwelling has been recently completed. Thus, under the facts of this case, it was a question of fact for the fact finder to determine whether the house was "recently completed." Among some of the factors which may be considered...