Lane v. Trenholm Bldg. Co.

• Decision Date: 29 October 1976
• Docket Number: No. 20300,20300
• Court: South Carolina Supreme Court
• Parties: Warren LANE, Respondent, v. TRENHOLM BUILDING COMPANY, Appellant.

Page 728

229 S.E.2d 728

267 S.C. 497

Warren LANE, Respondent, v. TRENHOLM BUILDING COMPANY, Appellant.

No. 20300.

Supreme Court of South Carolina.

Oct. 29, 1976.

Thomas E. McCutchen and Jeter E. Rhodes, Jr., Whaley, McCutchen & Blanton, Columbia, for appellant.

Bowers & Barnhill, Columbia, for respondent.

NESS, Justice:

This case involves the sale of a new home whereby the plaintiff-respondent, Warren Lane received a jury verdict of $12,500.00 against appellant, Trenholm Building Company. We affirm.

In 1967 or 1968 Trenholm, the developer of a subdivision, sold an undeveloped lot to Heritage Homes. Heritage intended to construct a house and paid Trenholm a small down payment and executed a second mortgage in favor of Trenholm which was to be retired when the house was sold. Heritage virtually completed the house but was not able to sell it. In 1969 it became apparent that Heritage was going out of business so Trenholm acquired the house and lot from Heritage in satisfaction of the mortgage and assumption of the construction loan to Heritage. In March, 1971, Trenholm sold the house to Lane for $25,000.00. ¹

A few months after acquiring the house, Lane advised Trenholm that the septic tank was not functioning properly. Trenholm ultimately installed a new septic tank designed to work in an area with a high water table. This system also was unsatisfactory and in July, 1972, Lane instituted this action against Trenholm alleging the failure of the septic tank system to function properly breached an implied warranty that the house was fit for use as a residence.

Trenholm asserts that it could not be held liable, as a matter of law, because it was not the builder of the house. The lower court held that Trenholm was liable, because it was engaged in the real estate business, and the developer of the subdivision.

We hold that when a new building is sold there is an implied warranty of fitness for its intended use which springs from the sale itself.

Rutledge v. Dodenhoff, 254 S.C. 407, 175 S.E.2d 792 (1970), held that the law of Caveat emptor, traditionally applied to defeat implied warranties in the sale of real estate by operation of a rule that all warranties in a contract for sale merge into the deed, should not govern the sale of a new house by a builder-vendor. Several reasons were given for the Rutledge decision: the transaction was primarily a sale of a house and not a conveyance of land, the disparity of bargaining positions between the seller and purchaser, reliance by the purchaser on the skill of the builder, and the inability of the purchaser to inspect the house for latent defects.

Appellant has argued persuasively that the articulated rationale of Rutledge does not apply. Appellant contends that there was no disparity in bargaining powers because it was merely trying to salvage its investment. The alternative it chose, assuming the construction loan and completing the house, was to that of foreclosure: hence, the bargaining position it occupied was certainly not stronger than the purchaser's.

The purchaser admitted he did not know who built the house. He could not have relied on the skill of Trenholm Builders. Since Trenholm was not involved in the installation of the septic tank or construction of the house, it had no better opportunity to inspect for latent defects than the purchaser. A VA team inspected the house, including the septic tank, and a permit to install the tank was issued by the county health authorities after they had conducted their own test. Therefore, the purchaser ostensibly was afforded all expectable protection which might result from inspections.

These arguments are cogent ones, but they fail to account for other, more elementary reasons, why an implied warranty should attach to the sale of this house.

Rutledge v. Dodenhoff, supra, recognized the essence of the transaction is the sale of a house and not a transfer of a parcel of land. A house is the sale of a product, similar to the sale of personalty. Once the court recognizes the essence of the transaction is the sale of a product with a clearly defined proposed use, there is little reason to apply ancient doctrines of real property law which are inconsistent with the current and historical treatment of sales of personalty in this State.

The doctrine of merger of warranties in a deed, applicable to real estate sales, has little relevancy to the sale of a product, whether it is personalty or a building. When land is conveyed, there is often no clearly defined objective in the transfer and it would be impossible to imply a warranty of fitness for any purpose. Even when a particular purpose is contemplated, as, for example, by restrictive covenants, the suitability of the land may depend on architectural proposals or other matters entirely independent of the conveyance. Finally, the purchaser can fully inspect undeveloped land and, therefore, when the law denies the purchaser of real estate the benefit of an implied warranty, the consequences are generally not unfair or unjust. ²

When a product is sold, the parties contemplate an expected use of the product. One of the primary objectives of the law of contracts and sales is to carry out the reasonable expectations of the parties. To this end, the court in this State has consistently rejected Caveat emptor and adopted the civil law rule of Caveat venditor as part of the common law of South Carolina. Timrod v. Shoolbred, 1 Bay 324 (1793); Champneys v. Johnson, 2 Brevard 268 (1809); Smith v. McCall, 1 McCord 220 (1821). As applied to the law of sales, Caveat emptor was 'repudiated and exploded . . .' by the South Carolina court as 'rather calculated to encourage injustice, than to inculcate correct principles of moral duty.' Champneys v. Johnson, supra, pp. 272--273.

Caveat venditor is premised upon the just philosophy that a 'sound price warrants a sound commodity.' The court hearkened to the call of Caveat venditor and observed that 'its superior excellence has been generally felt and acknowledged.' p. 273. Champneys v. Johnson, supra. Years later the court emphatically praised the rule as 'having triumphed over a variety of opposition.' Misroon & Timmons v. Waldo & Freeman, 2 Nott & McCord 76 (1819). See also Southern Iron & Equipment Co. v. Bamberg E & W Railway Company, 151 S.C. 506, 149 S.E. 271 (1929). Perhaps the greatest...