Holmes v. Worthey

• Decision Date: 13 July 1981
• Docket Number: No. 61573,61573
• Citation: 282 S.E.2d 919,159 Ga.App. 262
• Parties: HOLMES et al. v. WORTHEY et al.
• Court: Georgia Court of Appeals

Page 919

282 S.E.2d 919

159 Ga.App. 262

HOLMES et al. v. WORTHEY et al.

No. 61573.

Court of Appeals of Georgia.

Decided July 13, 1981.

Certiorari Granted Oct. 8, 1981.

Hylton B. Dupree, Jr., Stephen C. Steele, Marietta, for appellants.

G. Robert Howard, Marietta, for appellees.

BIRDSONG, Judge.

The appellants, Mr. and Mrs. Holmes, appeal from the trial court's grant of appellees' motion to dismiss. Mr. and Mrs. Holmes bought a new house from appellees, who were the builders, and in their complaint below sued appellees for defects in the construction of the house on theories of breach of contract and negligence. Appellees denied all the appellants' causal averments, and responded that on September 22, 1978, appellees conveyed certain property to the Holmes by warranty deed, and "all work done by these defendants ... and any of the provisions in the contract upon which plaintiffs sue have been merged into said warranty deed by operation of law." Finally appellees averred that they have no duty to the appellants with respect to the home conveyed to them by the warranty deed, and the only warranty made to the appellants was a warranty of title to their property. Appellees argued the defenses of caveat emptor and merger on their motion to dismiss.

On appeal, the appellants contend the trial court erred as a matter of law in holding that the contractual duty of a vendor-builder to construct a dwelling in a skillful and workmanlike manner is merged into and does not survive the delivery of the deed. Plaintiffs-appellants argue that the doctrine of caveat emptor and the question of merger of prior agreements into a subsequent deed are dependent upon the intent of the parties (Helmer v. Hegidio, 133 Ga.App. 168, 169, 210 S.E.2d 332), and that they have causes of action for breach of contract and negligence against the builder-vendor of a new house, citing Howell v. Ayers, 129 Ga.App. 899, 202 S.E.2d 189. Appellees principally rely upon Collier v. Sinkoe, 135 Ga.App. 732, 733, 218 S.E.2d 910 for the defense of caveat emptor, and cite Amos v. McDonald, 123 Ga.App. 509, 510, 181 S.E.2d 515 as authority for merger in that "[except for express warranties] agreements for the construction of a house to be placed on the property at the time of purchase are merged in the deed unless expressly exempted therefrom or unless they come under the collateral agreement theory ... with certain exceptions relating to fraud and misrepresentation...." Appellees thus argue that since appellants did not plead or show fraud or misrepresentation, they are without cause to sue.

The contract in this case is a form contract, dated June, 1978, between appellants and appellee Jack Worthey to buy and sell "all that tract of land" of a certain description and address, with special stipulations added on whereby appellees were required to construct a house pursuant to certain specifications. Held:

1. We reverse.

In Welding Prod. v. Kuniansky, 125 Ga.App. 537, 538, 188 S.E.2d 278, this court said: "Under the law of this State, absent fraudulent concealment of known defects, a seller-builder who conveys the realty and improvements thereon after completion is not liable to the purchaser thereof for property damages allegedly resulting from negligent construction. [Cits.]" (Emphasis supplied) In Amos v. McDonald, supra, we said: "The doctrine of 'caveat emptor' applies; [except for express warranties] agreements for the construction of a house to be placed on the property at the time of purchase are merged in the deed unless expressly exempted therefrom or unless they come under the collateral agreement theory ... with certain exceptions relating to fraud and misrepresentation ... [Cits.]"

In most Georgia cases dealing with the subject of a builder-seller's liability for defects in construction of a house, the extrapolation is made, implicitly or expressly, that since there is no implied warranty of fitness in the sale of a house, the doctrine of caveat emptor applies and therefore there can be no action for negligence. See for instance Dooley v. Berkner, 113 Ga.App. 162, 147 S.E.2d 685. Some Georgia cases have mixed the principles of merger and caveat emptor to defeat a home buyer's action based on defective construction (see Amos v. McDonald, supra); some have confused principles of negligence (tort) with principles of merger (contract) (see Reynolds v. Wilson, 121 Ga.App. 153, 156-157, 173 S.E.2d 256); some have hinged the question of merger to whether agreements were to be performed, in point of time, after delivery of the deed (see Cullens v. Woodruff, 137 Ga.App. 262, 223 S.E.2d 293; Reynolds v. Wilson, supra; and McKee v. Cartledge, 79 Ga.App. 629, 632, 54 S.E.2d 665). And in Walton v. Petty, 107 Ga.App. 753, 131 S.E.2d 655, we went so far as to say that in the absence of express warranties of fitness reserved in the deed, no action can be brought even for fraud in concealment of defects, since there are no implied warranties as to the condition of the house and the rule of caveat emptor applies.

From all this it can be seen that Georgia law in this field has not progressed beyond general common law concepts of the sale of real estate (land), i. e., is "not yet fully developed" (Pindar, Ga. Real Estate Law, § 18-23 (2d Ed.)) and that the question of a home buyer's remedy against the builder-seller of a defective house is weighted against the home buyer unless he can clearly show fraud, or in rarer cases, an imminently dangerous condition (see Whiten v. Orr Const. Co., 109 Ga.App. 267, 269, 136 S.E.2d 136) or that the plain intention of the parties was to create an express warranty of fitness or contractual duty which would in time of performance survive the delivery of the deed.

We have determined that this past development of law is insupportable and is not in harmony with public policy considerations of this state or with modern business realities. It is aptly pointed out in 25 ALR3d "Liability of Builder-Vendor or Other Vendor of New Dwelling for Loss, Injury, or Damage occasioned by Defective Condition Thereof," § 2(a), p. 390, that "the large scale, almost assembly line, production of houses on tracts owned and developed by the same individuals or corporations or connected entities which actually construct the houses began shortly after World War II and has continued unabated...." Courts have continued to treat such home purchases in the same manner as if they were traditional purchases in realty "and appurtenances thereon," with rules of merger of previous negotiations and the ancient doctrine of caveat emptor being applied (see esp. Restatement of Torts 2d, § 352; 25 ALR3d 390, fn. 12). "Thus there has been only slight recognition, if any, that in the sale of a new house, the primary purpose of the transaction is to provide a habitable dwelling for the purchaser, and the transfer of the land to him as vendee is secondary." 25 ALR3d 391, supra.

An interesting statement in Georgia law dramatically illustrates that last point and the significance of it. In Reynolds v. Wilson, supra, p. 153, 173 S.E.2d 256, we said: "The sale of the dwelling, of necessity, arose out of the sale of realty on which the dwelling was constructed," and proceeded to reason the case as if this were so. But the obvious reality of that case is that those suburban DeKalb County home buyers had not primarily bought a piece of land, but had primarily bought a dwelling to which, of necessity, a piece of realty was attached, and from a seller who was obviously in the business of building and selling dwellings. We therefore must look askance at that case and all the others like it, for to the extent that it is compelled to distort the realities of the situation to justify its reasoning, it proves its own weakness. In his special concurrence in Amos v. McDonald, supra, pp. 511-512, 181 S.E.2d 515. Judge Deen of this court expressed distress that in cases of this type the doctrine of caveat emptor has been revived "in all its viciousness, disregarding the rulings of a number of jurisdictions ... that where the defect is latent and the vendee could not reasonably have discovered it his action will not be barred because 'the common law as a vehicle of justice ... possesses an infinite capacity to grow, to keep abreast of current requirements, and to be alert to changing needs and mores.' [Cits.] ('The law should be based on current concepts of what is right and just and the judiciary should be alert to the never-ending need for keeping its common law principles abreast of the times.')" See also Wilhite v. Mays, 140 Ga.App. 816, 818, 232 S.E.2d 141.

I. Merger

The recent decision in PBR Enterprises v. Perren, 243 Ga. 280, 253 S.E.2d 765 disposed of cases where prior oral promises are made to complete a house after its purchase and where oral express warranties are given, by holding that such oral promises and agreements, not having been expressly included in the sales contract, merge into and are extinguished by the deed. (Compare, however, Little v. Merck, 124 Ga.App. 73, 75, 183 S.E.2d 234, and Kollen v. High Point Forest, 104 Ga.App. 713, 714, 123 S.E.2d 10 and see especially McKee v. Cartledge, supra.) So long as that court adheres to such a rationale, we are of course bound by its decision in the P. B. R. case as to oral agreements or promises, but in the case before us, we must decide whether written contractual agreements to build a house, which agreements are or are not included in the sales contract, will merge into the deed and thus defeat the homebuyer's action for breach of contract for failure to construct the dwelling in a fit and workmanlike manner, which is the duty implied in the contract to build (Howell v. Ayers, supra).

The notion that the doctrine of merger of contracts operates to defeat an action against the builder-seller for breach of contract (in failing to construct the dwelling in a fit and workmanlike manner, see Howell v....