Meadowbrook Condominium Ass'n v. South Burlington Realty Corp.

• Decision Date: 23 June 1989
• Docket Number: No. 85-563,85-563
• Citation: 565 A.2d 238,152 Vt. 16
• Parties: MEADOWBROOK CONDOMINIUM ASSOCIATION v. SOUTH BURLINGTON REALTY CORP.
• Court: Vermont Supreme Court

Page 238

565 A.2d 238

152 Vt. 16

MEADOWBROOK CONDOMINIUM ASSOCIATION v. SOUTH BURLINGTON REALTY CORP.

No. 85-563.

Supreme Court of Vermont.

June 23, 1989.

Carl H. Lisman and Mary G. Kirkpatrick of Lisman & Lisman, Burlington, for plaintiff-appellee.

Martin K. Miller and Michael H. Lipson of Miller, Eggleston & Rosenberg, Ltd., Burlington, for defendant-appellant.

Before ALLEN, C.J., PECK, DOOLEY and MAHADY, JJ., and BARNEY, C.J. (Ret.), Specially Assigned.

PECK, Justice.

Defendant appeals from a judgment of the Chittenden Superior Court that awarded damages to plaintiff for, among other things, defects in certain "common areas" of the Meadowbrook Condominium in South Burlington. We modify the judgment and affirm on that basis.

In 1974, defendant South Burlington Realty Corporation (SBRC) began construction on the Meadowbrook Condominium project. Over the next four years, SBRC completed and sold thirty-one townhouse residential units.

Under the condominium plan, an individual purchaser obtains outright ownership of the interior of his or her unit only. The buildings and all of the other property in the project--including roads, carports, walkways, and open areas--are designated as "common areas," and each purchaser acquires an undivided interest in all of these areas. SBRC also constructed all of Meadowbrook's common areas.

The responsibility for care and maintenance of the common areas lies with the Meadowbrook Condominium Association (Association), a group made up of all of the unit owners. By statute, the Association may also institute legal actions, on behalf of two or more unit owners, with regard to the common areas. 27 V.S.A. § 1327.

On October 8, 1980, the Association filed suit in the superior court, alleging the existence of significant problems with the condominium's roads, carports, overall drainage, and sewer systems. The Association also claimed that SBRC had made representations to prospective purchasers that cable television service would be available and that no such service had ever been obtained. The complaint, as later amended, stated five causes of action against defendant: negligence, strict liability, breach of express warranties, breach of implied warranties, and consumer fraud.

After an extensive trial, the superior court found that significant defects existed in several areas, including the roads and the carports. The defective condition of the roads and carports was found to have been readily apparent "to anyone who cared to look" by September, 1979 or shortly thereafter.

The court then concluded that SBRC was liable for breach of implied warranties with respect to defects in the roads, carports, sewer systems, and drainage. The court also concluded that defendant was liable for its failure to install cable television facilities under both breach of contract and consumer fraud theories. Compensatory damages were awarded in the amount of $71,250 for the roads, $22,500 for the carports, $35,600 for the overall drainage problems, $6,273 for the sewer systems, and $6,226 for the cost of obtaining cable television. The court also assessed $5,000 in punitive damages against SBRC under the consumer fraud statute for its actions relating to the cable television claim. Defendant brought the instant appeal, challenging the award of punitive damages as well as the assessment of damages relating to the roads and the carports.

I.

Defendant begins by urging this Court to hold that the implied warranty theory relied upon by the trial court does not extend to the common areas of a condominium where the alleged defects do not affect the reasonable and ordinary habitation of the dwelling structures themselves. We decline to adopt such a limitation.

In Rothberg v. Olenik, 128 Vt. 295, 262 A.2d 461 (1970), this Court first considered a claim that, in selling a newly constructed house, the builder/vendor implicitly warrants to the buyer that the house is built in a good and workmanlike manner and is suitable for habitation. After an exhaustive review of caselaw from other jurisdictions, the Court rejected an argument based on the doctrine of caveat emptor and embraced the implied warranty concept as Vermont law. Id. at 305, 262 A.2d at 467. It is important to note that, while Rothberg did not address the issue, the law will recognize an implied warranty only with respect to defects that were latent at the time of purchase. Redarowicz v. Ohlendorf, 92 Ill.2d 171, 183, 65 Ill.Dec. 411, 417, 441 N.E.2d 324, 330 (1982); Gupta v. Ritter Homes, Inc., 646 S.W.2d 168, 169 (Tex.1983).

SBRC does not argue that the implied warranty doctrine is inapplicable to condominium sales, nor does it seriously contend that such a warranty cannot apply where defects in common areas are alleged. Instead, defendant maintains that the warranty extends only to those defects that affect the reasonable and ordinary habitation of the dwelling itself.

This argument obfuscates the distinction between the two warranties recognized in Rothberg: the warranty of habitability and the warranty of good workmanship. The cases cited by defendant illustrate this distinction. The primary authority SBRC relies upon in its brief, for example, is quoted without regard to context. It is true that, in Aronsohn v. Mandara, 98 N.J. 92, 484 A.2d 675 (1984), the high court of New Jersey held that a defective patio was not actionable under a theory of implied warranty of habitability, reasoning that the defect alleged did not affect the essential habitability of the home. Id. at 103-05, 484 A.2d at 681-82. But the court proceeded to remand the case for a new trial on the question whether the implied warranty of good workmanship had been breached. Id. at 106-07, 484 A.2d at 683. Thus, the case stands in direct contradiction to defendant's assertion that peripheral defects must affect the habitability of the dwelling in order to come under the umbrella of an implied warranty theory.

Similarly, SBRC cites Briarcliffe West Townhouse Owners Ass'n v. Wiseman Construction Co., 118 Ill.App.3d 163, 73 Ill.Dec. 503, 454 N.E.2d 363 (1983), in which the court opined that "[t]here may be circumstances in which a latent defect in the common land can affect the habitability of the living quarters." Id. at 167, 73 Ill.Dec. at 505, 454 N.E.2d at 365. A complete reading of that case, however, reveals that the court was discussing a claim based on an implied warranty of habitability and one that involved vacant common land. Neither the facts nor the nature of the claim, therefore, are helpful to defendant here.

SBRC goes on to argue that the trial court was more concerned with quality standards than with function, and it contends in its brief that "Meadowbrook owners who wished to be assured that the construction of paved areas and carports would be in accordance with 'sound' engineering and construction standards were obligated to negotiate an express warranty to that effect in their deeds or by separate, surviving agreements." While we agree with defendant that Rothberg requires neither perfection nor buyer satisfaction, we observe that the quoted proposition is antithetical to Rothberg 's adoption of an implied warranty of "good and workmanlike" building techniques. Here, the trial court's findings respecting the condition of the roads and carports provided adequate support for its conclusion that the implied warranty of good workmanship had been breached.

In sum, defendant has failed to demonstrate that the trial court erred either in its reliance upon or in its application of an implied warranty theory of liability.

II.

In the alternative, SBRC contends that the trial court erred by refusing to apportion the damages awarded for the defective roads and carports in a manner that would limit recovery to those unit owners to whom defendant was actually liable. Defendant's argument is based on the trial court's finding that many of the individual owners purchased their units after September, 1979, when the defects in the roads and carports had become apparent. Because Rothberg 's implied warranties apply only where structural defects are latent at the time of sale, defendant maintains that these latter purchasers are not entitled to damages. We agree.

The apportionment argument arises, in part, because of the representative nature of the lawsuit. The Association, the nominal plaintiff, brought the action under the terms of 27 V.S.A. § 1327, which provides, in pertinent part:

Without limiting the rights of any apartment owner, actions may be brought by the manager or board of directors ... on behalf of two or more of the apartment owners, as their respective interests may appear, with respect to any cause of action relating to the common areas and facilities of more than one apartment....

The trial judge ruled that this statute:

[A]llows the ... Association to stand in the shoes of individual owners with individual legal claims. In that respect, the standing of the Association to sue is derivative in nature. [The Association] does not enjoy a separate right to recover. Its claim in this suit is only as good as that of its constituent members.... [C]oncomitantly, the homeowners' association can recover only those damages to which individual apartment owners are entitled.

Hence, determination of the damages issue requires examination of the owners' individual legal claims.

Although the trial court did not rule directly on the question, it appears to have agreed with defendant that those owners who purchased their units after defects in the roads and carports had become apparent were not entitled to recovery of damages. Nevertheless, the court rejected defendant's apportionment argument, opining that "each apartment owner at Meadowbrook has an undivided interest in the common elements and should be entitled to complete restoration when liability is shown." We hold that the trial court erred in this respect.

With respect to the common...