Kirk v. Ridgway

• Decision Date: 21 August 1985
• Docket Number: No. 84-1503,84-1503
• Citation: 373 N.W.2d 491
• Parties: Joseph C. KIRK, Appellee, v. Clayton RIDGWAY, Appellant.
• Court: Iowa Supreme Court

Page 491

373 N.W.2d 491

Joseph C. KIRK, Appellee, v. Clayton RIDGWAY, Appellant.

No. 84-1503.

Supreme Court of Iowa.

Aug. 21, 1985.

Philip A. Ostien of Davis, Grace, Harvey, Horvath, Gonnerman & Rouwenhorst, Des Moines, for appellant.

Melodee Hanes of Scalise, Scism, Sandre & Uhl, Des Moines, for appellee.

Considered by REYNOLDSON, C.J., and HARRIS, LARSON, SCHULTZ, and CARTER, JJ.

LARSON, Justice.

In 1973, Joseph C. Kirk bought a nearly-completed house from Clayton Ridgway, the contractor who had built, and owned, the house. Several years after the purchase, the exterior paint began to peel and parts of the house were repainted in 1976 and 1980. The peeling continued and, in 1981, Kirk was told by his painter that there was a problem with the original paint. Kirk related that information to Ridgway in 1981 but the matter remained unresolved.

Kirk brought an action against Ridgway in 1983, alleging breach of an implied warranty of "workmanlike" construction. In addition to the paint problem, Kirk also complained of defects in the driveway and the drywall on the inside of the house. The court granted summary judgment for the defendant as to the latter two problems but overruled it as to the complaints about the paint. The case went to trial solely on the question of whether the peeling of the paint constituted a breach of implied warranty.

The trial court found that the peeling was the result of "incompatibility" between the building materials used and the exterior paint. The court held this was a breach of the warranty to build the house "in a reasonably good and workmanlike manner," fit for the purpose intended, habitation. The only way of solving the problem, it concluded, was to remove and replace the siding and repaint. Judgment was entered against Ridgway, who appealed. We affirm.

I. Should We Adopt the Implied Warranty of Workmanship in the Sale of Real Estate?

In construction contracts there is an implied warranty that the building to be erected will be built in a reasonably good and workmanlike manner and that it will be reasonably fit for the intended purpose. Busker v. Sokolowski, 203 N.W.2d 301, 303 (Iowa 1972); Markman v. Hoefer, 252 Iowa 118, 123, 106 N.W.2d 59, 62 (1960); 17A C.J.S. Contracts § 329, at 292-94 (1963). This has long been the law of this state. See e.g., Smith & Nelson v. Bristol, 33 Iowa 24, 25 (1871) (contract to build house; warranty to construct in workmanlike manner implied).

But what if a prospective homeowner does not hire the builder to build the house but buys one from him already built? In that case the law in this state, and elsewhere, has not always treated the homeowner as well. In fact, older cases categorically observed that there were no implied warranties in the sale of real estate. See e.g., Fegeas v. Sherrill, 218 Md. 472, 476, 147 A.2d 223, 225 (1958) ("It is settled in most jurisdictions that there are no implied warranties in the sale of real estate."); Kerr v. Parsons, 83 Ohio App. 204, 208, 82 N.E.2d 303, 305 (1948) ("Ordinarily there is no implied warranty as to the condition of real estate sold or leased...."); Steiber v. Palumbo, 219 Or. 479, 488-89, 347 P.2d 978, 982 (1959); Dennison v. Harden, 29 Wash.2d 243, 250, 186 P.2d 908, 912 (1947) ("[We] have found no cases, and appellant has cited none, which recognize that there is such a thing as implied warranty in the sale of real estate."); See generally Annot., 25 A.L.R.3d 383, 390-91 (1969).

The reason for distinguishing a construction contract from a contract or deed to a completed house was that, in the latter case, the doctrine of caveat emptor applied. The house, or other completed building, was there for inspection. A buyer who failed to make an adequate inspection, or to extract an express warranty from the seller, was just out of luck. During the reign of caveat emptor, it has been observed, courts considered purchasing as a game of chance. See Roberts, The Case of the Unwary Home Buyer: The Housing Merchant Did It, 52 Cornell L.Q. 835, 836 (1967).

Years ago, before the times of tract developments, prefabricated homes, and "spec" houses, the purchase of a new home in a completed stage was fairly rare. A prospective homeowner would usually purchase a lot, hire a draftsman to prepare the plans, and employ a builder to build the house. If the house turned out to be defectively designed, the owner looked to the person who designed it. If the house was improperly built, the owner looked to the builder. See Roberts, supra, at 837.

That scenario has, to a large extent, now changed. Recent cases and a considerable body of law review authority show that a combination of factors operating simultaneously have caused courts to balk at the continued application of the caveat emptor rule in the purchase of new homes.

First, as noted above, home-construction techniques have changed, from single-unit construction under the supervision of the owner, to the tract development commonly found today. Second, there has been an increasing interest in consumer protection, as evidenced by the trend toward recognizing implied warranty claims in the sale of personalty. See Mease v. Fox, 200 N.W.2d 791, 794 (Iowa 1972) (noted development of law in sale of personalty in adopting implied warranty of habitability in lease).

One writer has observed:

[T]he courts which have given relief to the purchaser of a new house sold by the contractor-vendor have preferred to put their theory of recovery on the breach of an implied warranty of "fitness for human habitation," where there was no express warranty. This seems entirely in accord with the better reasoned and forwardlooking decisions in other fields of warranty.

7 Williston on Contracts § 926A, at 813 (3d ed. 1963).

Last, increasing complexity in the houses themselves have made it more difficult for a buyer to discover defects in their construction. In large part the buyer must rely on the skill and judgment of the builder.

When a vendee buys a development house from an advertised model ... he clearly relies on the skill of the developer and on its implied representation that the house will be erected in reasonably workmanlike manner and will be reasonably fit for habitation. He has no architect or other professional adviser of his own, he has no real competency to inspect on his own, his actual examination is, in the nature of things, largely superficial, and his opportunity for obtaining meaningful protective changes in the conveyancing documents prepared by the builder vendor is negligible. If there is improper construction such as a defective heating system or a defective ceiling, stairway and the like, the well-being of the vendee and others is seriously endangered and serious injury is forseeable. The public interest dictates that if such injury does result from the defective construction, its cost should be borne by the responsible developer who created the danger and who is in the better economic position to bear the loss rather than by the injured party who justifiably relied on the developer's skill and implied representation.

Schipper v. Levitt & Sons, Inc., 44 N.J. 70, 91, 207 A.2d 314, 325-26 (1965).

One court has specifically noted the practical problems with the theory that a buyer may reasonably protect himself by inspecting the house. It said:

Although considered to be a "real estate" transaction because the ownership to land is transferred, the purchase of a residence is in most cases the purchase of a manufactured product--the house. The land involved is seldom the prime element in such a purchase, certainly not in the urban areas of the state. The structural quality of a house, by its very nature, is nearly impossible to determine by inspection after the house is built, since many of the most important elements of its construction are hidden from view. The ordinary "consumer" can determine little about the soundness of the construction but must rely upon the fact that the vendor-builder holds the structure out to the public as fit for use as a residence, and of being of reasonable quality. Certainly in the case here no determination of the existence of the defect [settling of house] could have been made without ripping out the slab which settled, and maybe not even then. The home here was new and was purchased from the company which built it for sale. The defect here was clearly latent and not capable of discovery by even a careful inspection.... Common sense tells us that a purchaser under these circumstances should have at least as much protection as the purchaser of a new car, or a gas stove, or a sump pump, or a ladder.

Smith v. Old Warson Development Company, 479 S.W.2d 795, 799 (Mo.1972) (en banc).

We believe that a purchaser of a new home from a builder-vendor should be protected against latent defects in the home and that our law of real estate should accommodate a rule of implied warranty commensurate with our law of consumer protection in other areas. This is clearly the trend of the law, if not already the majority rule. See Corbin on Contracts § 686A, at 837 (Kaufman Supp.1984); 7 Williston on Contracts § 926A, at 802.

Over the years, the number of cases which apply the rule of caveat emptor strictly appears to be diminishing, while there is a distinct tendency to depart therefrom, either by way of interpretation, or exception, or by simply refusing to adhere to the rule where it would work injustice.

7 Williston on Contracts § 686A, at 802. See generally Annot., 25 A.L.R.3d at 391; Smith, 479 S.W.2d at 801 (list of cases and law review articles in support of implied warranty applications); McDonald v. Mianecki, 79 N.J. 275, 285-88, 398 A.2d 1283, 1288-91 (1979) (same).

The Uniform Land Transactions Act (which Iowa has not yet adopted) reflects the current trend. It provides in part that an implied warranty will cover all purchases from "seller[s] in the business of selling real estate." The warranty, under that act,...