Melody Home Mfg. Co. v. Barnes

• Decision Date: 04 November 1987
• Docket Number: No. C-5508,C-5508
• Citation: 741 S.W.2d 349
• Parties: MELODY HOME MANUFACTURING COMPANY, Petitioner, v. Lonnie BARNES et ux., Respondents.
• Court: Texas Supreme Court

Page 349

741 S.W.2d 349

72 A.L.R.4th 259

MELODY HOME MANUFACTURING COMPANY, Petitioner, v. Lonnie BARNES et ux., Respondents.

No. C-5508.

Supreme Court of Texas.

Nov. 4, 1987.

M. Ward Bailey, M. Ward Bailey & Associates, P.C., Fort Worth, for petitioner.

Timothy G. Chovanec, Priddy & Chovanec, Fort Worth, Joe K. Longley, Mark L. Kincaid, Longley & Maxwell, Austin, for respondents.

ON MOTION FOR REHEARING

SPEARS, Justice.

The court's opinion of June 17, 1987 is withdrawn and the following is substituted therefor.

This is a Deceptive Trade Practices-Consumer Protection Act (DTPA) implied warranty case. Lonnie and Donna Barnes sued Melody Home Manufacturing Company under the DTPA for breach of an implied warranty that repairs would be done in a good and workmanlike manner and for other DTPA violations. The jury found that Melody Home knowingly breached this implied warranty and awarded discretionary damages. The trial court rendered judgment for the Barneses and the court of appeals affirmed the judgment of the trial court. 708 S.W.2d 600. We affirm the judgment of the court of appeals.

In 1979, the Barneses ordered a modular pre-fabricated home from Melody Home. Their home was delivered in May 1980. After the Barneses moved in, they continually experienced puddles and dampness inside the house. Over two years after moving in, they discovered that a sink was not connected to the drain in one of the interior walls.

The continual leak caused severe damage to the home's sheetrock, insulation, and flooring. The Barneses told Melody Home about the problem. Workmen from Melody Home came out twice, but their efforts were unsatisfactory, and additional damages were caused by the repair. The workmen cut and tore linoleum while attempting to repair the home. Moreover, they failed to reconnect the washing machine drain, causing the house to flood with resulting damage to the floors, cabinets, and carpeting.

The Barneses then filed this DTPA implied warranty suit against Melody Home. The jury found that Melody Home failed to construct the home in a good and workmanlike manner. The jury further found that Melody Home breached its implied warranty to repair in a good and workmanlike manner and that this breach was knowing. Based on its finding that Melody Home knowingly breached the implied warranty, the jury awarded $5,000 in discretionary damages under Tex.Bus. & Com.Code Ann. § 17.50(b)(1) (Vernon Supp.1987).

Melody Home appealed the award of DTPA discretionary damages. The court of appeals held that the sale of a service carries with it the implied warranty that the service will be performed in a skillful and workmanlike manner and affirmed the judgment of the trial court.

Melody Home first challenges the Barneses' status as consumers with regard to the repairs. DTPA plaintiffs must qualify as consumers, as that term is defined in Tex.Bus. & Com.Code Ann. § 17.45(4) (Vernon Supp.1987), ¹ to maintain a private cause of action under section 17.50 of the Act. Flenniken v. Longview Bank & Trust Co., 661 S.W.2d 705, 706 (Tex.1983). We have recognized at least two requirements to establish DTPA consumer status. First, the plaintiffs must have sought or acquired goods or services by purchase or It is uncontroverted that the Barneses purchased goods and thus were "consumers" when they originally bought the home. Melody Home's attempts to repair the defects in the home were, by definition, "services" under the DTPA. Section 17.45(2) defines "services" as "work, labor or service purchased ... for use including services furnished in connection with the sale or repair of goods." (emphasis added). Melody Home argues that the Barneses were not "consumers" with regard to the repair services because they did not purchase them with cash. See, e.g., Exxon Corp. v. Dunn, 581 S.W.2d 500 (Tex.Civ.App.--Dallas 1979, no writ). The absence of a cash transfer is not determinative because DTPA plaintiffs establish their standing as consumers in terms of their relationship to a transaction, not by their contractual relationship with the defendant. Flenniken, 661 S.W.2d at 707. The question then is whether the Barneses "purchased" the repair services within the meaning of the Act.

lease. Sherman Simon Enter., Inc. v. Lorac Service Corp., 724 S.W.2d 13, 15 (Tex. 1987); Cameron v. Terrell & Garrett, Inc., 618 S.W.2d 535, 539 (Tex.1981). Second, the goods or services purchased or leased must form the basis of the complaint. Sherman Simon Enter., Inc., 724 S.W.2d at 15; Cameron, 618 S.W.2d at 539.

In Humber v. Morton, 426 S.W.2d 554 (Tex.1968), this court held that a builder/vendor impliedly warrants to a purchaser that a building constructed for residential use has been constructed in a good and workmanlike manner and is suitable for human habitation. Evans v. J. Stiles, Inc., 689 S.W.2d 399, 400 (Tex.1985). When the Barneses discovered the defect in their home, they had the option to immediately sue for money damages or give Melody Home the opportunity to cure the problem. The parties' choices to allow and make repairs relate back to the original purchase and were a continuation of that transaction.

The Barneses did not lose their consumer status by allowing Melody Home to attempt to correct the problem and by deferring their lawsuit. Under Melody Home's argument the Barneses would be penalized by losing their consumer status because they allowed repairs. The law encourages dispute resolution prior to litigation. See Tex.Bus. & Com.Code Ann. § 17.50A (Vernon Supp.1987). Accordingly we hold that the Barneses "purchased" the repair services.

Melody Home next contends that repair services do not carry with them an implied warranty that they will be performed in a good and workmanlike manner. Implied warranties are created by operation of law and are grounded more in tort than in contract. La Sara Grain v. First Nat'l Bank of Mercedes, 673 S.W.2d 558, 565 (Tex.1984); Humber, 426 S.W.2d at 556. A number of courts of appeals decisions have expressly or impliedly recognized such an implied warranty. ² In addition, several articles, comments, and notes have concluded that the doctrine of implied warranty should apply to services. ³ Despite An implied warranty arises by operation of law when public policy so mandates. Dennis v. Allison, 698 S.W.2d at 95; Jacob E. Decker & Sons, Inc. v. Capps, 139 Tex. 609, 164 S.W.2d 828, 829 (1942). Unlike the situations in Nobility Homes of Texas, Inc. v. Shivers, 557 S.W.2d 77, 78 (1977) and La Sara Grain, 673 S.W.2d at 565, consumers of services do not have the protection of a statutory or common law implied warranty scheme. The issue presented in this case is whether the protection of Texas consumers requires the utilization of an implied warranty that repair services of existing tangible goods or property will be performed in a good and workmanlike manner as a matter of public policy. Nobility Homes of Texas, Inc., 557 S.W.2d at 78.

its importance, this court has never ruled on this issue. But see Dennis v. Allison, 698 S.W.2d 94, 96 (Tex.1985) (Ray, J., dissenting).

During the last thirty-five years, the United States has shifted from a goods to a services oriented economy. ⁴ With this change has come a marked decrease in the quality of services. ⁵ Similar quality control problems and consumer protection interests led this court and the legislature to apply the theory of implied warranty to products, goods, and new houses. See Humber, 426 S.W.2d at 562; McKisson v. Sales Affiliates, Inc., 416 S.W.2d 787, 789 (Tex.1967); Jacob E. Decker & Sons, 164 S.W.2d at 832; see also Tex.Bus. & Com.Code Ann. § 2.314 (Vernon 1968).

Just as with products, an examination of several strict liability policies favors the extension of the theory of implied warranty to service transactions. See Greenfield, 1974 Utah L.Rev. at 688-691; Prosser, The Assault Upon the Citadel, 69 Yale L.J. 1099, 1120-24 (1960); Comment, 17 Tex.Tech.L.Rev. at 938-42. First, the public interest in protecting consumers from inferior services is paramount to any monetary damages imposed upon sellers who breach an implied warranty. Second, a service provider is in a much better position to prevent loss than is the consumer of the service. Many services are so complicated and individually tailored that a consumer is unable to independently determine quality and must depend on the experience, skill, and expertise of the service provider. ⁶ Third, a consumer should be able to rely upon the expertise of the service provider. The application of implied warranty to services would encourage justifiable reliance on the service providers who would have more incentive to increase and maintain the As Justice Norvell wrote in Humber:

quality of the services they provide. Fourth, a service provider is better able to absorb the cost of damages associated with inferior services through insurance and price manipulation than is the individual consumer.

That Court best serves the law which recognizes that the rules of law which grew up in a remote generation may, in the fullness of experience, be found to serve another generation badly, and which discards the old rule when it finds that another rule of law represents what should be according to the established and settled judgment of society, and no considerable property rights have become vested in reliance on the old rule.

426 S.W.2d at 561-62, quoting Cardozo, The Nature of the Judicial Process at 151 (1971). The caveat emptor rule as applied to services such as repairs is an anachronism patently out of harmony with modern service buying practices. It does a disservice not only to the ordinary prudent purchaser but to the industry itself by encouraging the purveyor of shoddy workmanship. Id. at 562.

We hold that an implied warranty to repair or modify existing tangible goods or property in a good and workmanlike manner is available to consumers suing under the DTPA. The legislative history of the...