Hodgson v. Chin
| Decision Date | 08 June 1979 |
| Citation | 168 N.J.Super. 549,403 A.2d 942 |
| Parties | Francis R. HODGSON and Carol J. Hodgson, his wife, Plaintiffs-Appellants, v. Edward CHIN and Jenny Soo Chin, his wife, Defendants-Counterclaimants andThird-Party Plaintiffs-Respondents, v. William HODGSON and Marion L. Hodgson, his wife, Third-Party Defendants-Appellants. |
| Court | New Jersey Superior Court — Appellate Division |
Jan M. Schlesinger, Mount Holly, for appellants (Hartman, Schlesinger, Schlosser & Faxon, Mount Holly, attorneys).
James R. Coley, Jr., Trenton, for plaintiffs-respondents (Coley & McCarthy, Trenton, attorneys).
Before Judges CONFORD, PRESSLER and KING.
The opinion of the court was delivered by
CONFORD, P. J. A. D. (retired and temporarily assigned).
In the recent case of McDonald v. Mianecki, 79 N.J. 275, 398 A.2d 1283 (1979), our Supreme Court held that the builder-vendor of a new home is subject to an implied warranty that the house which he constructs will be of reasonable workmanship and habitability. Id. at 293, 398 A.2d 1283. The court affirmed a holding of this court to the same effect. 159 N.J.Super. 1, 386 A.2d 1325 (1978). The issue in this appeal is whether that implied warranty extends to commercial premises, here a building consisting of two small stores on the first floor and two apartments on the second floor. The trial judge, relying on the principles set forth in Totten v. Gruzen, 52 N.J. 202, 245 A.2d 1 (1968), and Schipper v. Levitt & Sons, Inc., 44 N.J. 70, 207 A.2d 314 (1965), held that the vendor was subject to an implied warranty that the building would be reasonably fit for the purpose for which it was constructed. 1
Plaintiffs brought this action to foreclose on a second mortgage which defendants refused to pay because the building had serious structural defects. By way of counterclaim against plaintiffs and third-party complaint against Francis Hodgson's brother and his wife, who were also developers of the property, defendants contended that the developers breached express and implied warranties that the building was structurally sound. The case was heard by a judge without a jury and decided in favor of defendants on the counterclaim. Judgment was entered in their favor for $14,826. Payments on the second (purchase-money) mortgage given the plaintiffs were stayed until the money judgment was satisfied.
Around 1973 the Hodgsons subdivided a tract of land they owned in Brant Beach, Long Beach Island, into 18 lots and constructed 16 residences and two commercial buildings thereon. Each commercial building comprised two stores on the first floor and two apartments on the second floor.
In November 1973 the defendants-buyers approached Francis Hodgson offering to purchase one of the commercial buildings. They were looking for investment property in order to relocate their business, a Chinese take-out restaurant and gift store. Negotiations culminated in a contract of sale of the property for $86,500 on February 23, 1974. The contract provided for a total down payment of $17,300, with the remaining $69,200 to be financed under a purchase money mortgage held by sellers. The contract as initially proposed stated that the property would be sold "as is." However, buyers rejected those terms, and the final contract contained a one-year guarantee of the roof, plumbing and heating systems. It also required sellers to install certain items. Mortgage payments were deferred until June 1, 1974.
At the time of closing several stipulated items had not been installed, and buyers could not test the electrical or plumbing systems because the utilities had not been turned on.
Although the sales agreement called for sellers to take a purchase money mortgage for the full purchase price, in fact Citizens State Bank held the first mortgage on the property, and sellers took a second mortgage in the amount of approximately $20,000. Buyers made payments to the bank on the first mortgage, but paid nothing on the second mortgage because they discovered a number of construction defects when they began to use the premises in the summer of 1974. They asked the sellers to remedy these defects but the sellers did not do so.
Defendants at trial adduced the testimony of an expert witness a carpenter and mason who specializes in residential and light commercial construction. His inspection of and report concerning the structure revealed the following major construction defects:
1. Sagging of roof because of improper framing and use of inferior lumber.
2. Severe settlement of front portion of building due to insufficient footings.
3. Lack of attic ventilation.
4. Foundation insecure.
5. Stairway supports inadequate.
6. Siding of inferior material and improperly installed.
7. Front stair "horses" incorrectly installed; split and broken.
The total estimated cost of repairs, which was broken down as to items, was $14,826. The expert also found a number of less serious defects but did not report on those as they were not major defects.
The trial judge held there was an implied warranty of fitness for intended purpose in the case of new construction such as this and fully credited the testimony of defendants' expert as to the defects and consequential damages because of the breach of warranty.
On this appeal the sellers seek to distinguish McDonald, supra, on the ground that its holding applied only to residential properties, and they say that the law should treat differently commercial properties purchased primarily for investment and business purposes. They argue that the primary reason for extending an implied warranty to residential property lies in the disparity of bargaining power between the sellers of a new home and the purchaser. Sellers claim that this disparity of bargaining power does not exist in sales of commercial property. They suggest that the prospective purchaser of commercial property can protect himself by taking advantage of readily available building inspection services. They also assert that warranties should not extend to commercial premises because buyers of such property are not concerned with the habitability of the premises, but only with its income-producing potential. Finally, they argue that even if warranties extend to commercial property, that change in the law should be applied prospectively.
In McDonald defendant builder constructed a home selected by plaintiffs on a lot owned by him. Water was to be supplied through a well system, but the water from that well was not potable. Defendant made a number of attempts to alleviate the problem, but was unsuccessful, whereupon plaintiffs sued for damages. As noted, the court held that builders-vendors impliedly warrant that a house which they...
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... ... Mianecki, 79 N.J. 275, 284, 398 A.2d 1283, 1288 [405 A.2d 791] (1979); see also Hodgson v. Chin, 168 ... Page 239 ... N.J.Super. 549, 403 A.2d 942 (App.Div.1979). These warranties arise by operation of law and recognize that, under ... ...
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