Montgomery v. Engelhard

• Decision Date: 02 June 2015
• Docket Number: No. 31888–5–III.,31888–5–III.
• Citation: 352 P.3d 218,188 Wash.App. 66
• Parties: Peggy MONTGOMERY, and Dwight Montgomery, and Lisa Montgomery, husband and wife, Appellants, v. Glen L. ENGELHARD, Jane Doe Engelhard, and their marital community; William M. Adams, Jane Doe Adams, and their marital community; and TB Adams Realty, LLC, a Washington real estate firm, Respondents.
• Court: Washington Court of Appeals

188 Wash.App. 66

352 P.3d 218

Peggy MONTGOMERY, and Dwight Montgomery, and Lisa Montgomery, husband and wife, Appellants

v.Glen L. ENGELHARD, Jane Doe Engelhard, and their marital community; William M. Adams, Jane Doe Adams, and their marital community; and TB Adams Realty, LLC, a Washington real estate firm, Respondents.

No. 31888–5–III.

Court of Appeals of Washington, Division 3.

June 2, 2015.

Barbara June Rhoads–Weaver, Sustainable Law, PLLC, Vashon, WA, Kyle C. Olive, Olive Bearb Grelish & Gilbert PLLC, Seattle, WA, for Appellants.

John Woodruff Rankin Jr., Pamela A. Okano, Reed McClure, Seattle, WA, for Respondents.

Opinion

BROWN, A.C.J.

¶ 1 Lisa Montgomery, Dwight Montgomery, and Peggy Montgomery (collectively the Montgomerys) appeal the summary judgment dismissal of their suit for breach of an implied warranty of habitability against Glen Engelhard, Jane Doe Engelhard, William Adams, Jane Doe Adams, and TB Adams Realty, LLC (collectively Mr. Engelhard). The Montgomerys contend material questions of fact remain regarding whether Mr. Engelhard was regularly engaged in building, whether he had the home built for personal use or for sale, and whether the home was sold to the Montgomerys as a new house. We disagree, and affirm.

FACTS

¶ 2 In 1997, Mr. Engelhard purchased an undeveloped parcel near the Meadow Springs Country Club in Richland. At the time, Mr. Engelhard was a real estate agent and had been involved in the development of “two or three small commercial projects.” Clerk's Papers (CP) at 39. In May 1998, the City of Richland issued a building permit to Mr. Engelhard for a single family dwelling on the Richland property. Mr. Engelhard retained Castle Builders as his general contractor. Mr. Engelhard, however, paid the subcontractors directly, because, “it saves on insurance for the builder and it saves, I don't know, bookkeeping time for him, and something else.... I do that with the commercial buildings we do too quite often, primarily to prevent mechanics' liens and so forth.” CP at 443–44.

¶ 3 The city issued a certificate of occupancy in January 1999. Mr. Engelhard allegedly moved in soon after; the dispute here is whether he actually lived there while claiming the residence as a primary residence for tax purposes. Mr. Montgomery acknowledges Mr. Engelhard appeared to be “living in the upstairs” of the Richland house when Mr. Montgomery met Mr. Engelhard at the house before playing golf in 2001; Mr. Engelhard was “going through his mail and paying bills.” CP at 464.

¶ 4 In April 2002, Mr. Montgomery arranged for his mother, Peggy Montgomery, to purchase the house from Mr. Engelhard. The two entered into a purchase and sale agreement. Peggy Montgomery elected not to have an inspection because she “didn't think that it was necessary.” CP at 84. In May 2002, Mr. Montgomery and his wife, Lisa, moved in as renters as a favor from Mr. Engelhard. The sale closed in July 2003, and Peggy Montgomery moved into the house in 2004.

¶ 5 In September 2008, the Montgomerys began experiencing problems with pipes breaking, causing water damage throughout the home. In October 2010, they hired an inspector to determine the source of the problem. The inspector “opined the exterior cladding on the home was failing, allowing water intrusion which was causing rot and mold growth.” CP at 41. He further noted there was “no vapor barrier under exterior walls.” Id. A vapor barrier between the foundation and the basement floor prevents ground water infiltration. In October 2010, the Montgomerys vacated the home due to mold growth.

¶ 6 In 2012, the Montgomerys sued Mr. Engelhard as well as TB Adams Realty, LLC, the real estate firm where he worked, and its principal partly alleging breach of contract including breach of the implied warranty of habitability. The Montgomerys' other claims are not in dispute here. The trial court granted Mr. Engelhard's request for summary judgment on the breach of contract/implied warranty. The Montgomerys unsuccessfully requested reconsideration. The parties stipulated to a dismissal without prejudice of certain other claims. The Montgomerys appealed.

ANALYSIS

A. Implied Warranty of Habitability

¶ 7 The issue is whether the trial court erred by summarily dismissing the Montgomerys' breach of the implied warranty of habitability claim. The Montgomerys contend genuine issues of material fact remain as to each element of their implied warranty of habitability claim to preclude summary judgment.

¶ 8 We review an order or denial of summary judgment de novo, performing the same inquiry as the trial court. Jones v. Allstate Ins. Co., 146 Wash.2d 291, 300, 45 P.3d 1068 (2002). We construe the “facts and all reasonable inferences from the facts in the light most favorable to the nonmoving party.” Hertog v. City of Seattle, 138 Wash.2d 265, 275, 979 P.2d 400 (1999). “A material fact is one upon which the outcome of the litigation depends.” Balise v. Underwood, 62 Wash.2d 195, 199, 381 P.2d 966 (1963). The burden is on the moving party to show no remaining issue of material fact. Young v. Key Pharm., Inc., 112 Wash.2d 216, 225, 770 P.2d 182 (1989). The nonmoving party must specify facts demonstrating a genuine issue of material fact and cannot rest on mere allegations. CR 56(e) ; Baldwin v. Sisters of Providence in Wash., Inc., 112 Wash.2d 127, 132, 769 P.2d 298 (1989). We affirm a summary judgment if no genuine issues of material fact remain and the moving party is entitled to judgment as a matter of law. CR 56(c) ; Huff v. Budbill, 141 Wash.2d 1, 7, 1 P.3d 1138 (2000).

¶ 9 In Washington, the doctrine of implied warranty of habitability protects the first occupants of residential property against the risk of fundamental defects in the structure of a home. Stuart v. Coldwell Banker Commercial Grp., Inc., 109 Wash.2d 406, 416, 745 P.2d 1284 (1987). Washington adopted the implied warranty of habitability in House v. Thornton, 76 Wash.2d 428, 436, 457 P.2d 199 (1969). In House, a builder-vendor constructed a house on an unstable site, resulting in severe deterioration of the foundation. Id. at 429–31, 457 P.2d 199. The court found the builder liable, defining the implied warranty rule as follows, “when a vendor-builder sells a new house to its first intended occupant, he impliedly warrants that the foundations supporting it are firm and secure and that the house is structurally safe for the buyer's intended purpose of living in it.” Id. at 436, 457 P.2d 199. Thus, there are two requisites for an action: the builder- vendor of the dwelling must be a commercial builder and the unit must be built for sale, not as a personal occupancy. Atherton Condo. Apartment–Owners Ass'n Bd. of Dirs. v. Blume Dev. Co., 115 Wash.2d 506, 519, 799 P.2d 250 (1990).

¶ 10 Builder–Vendor. A “vendor-builder” is “a person regularly engaged in building, so that the sale is commercial rather than casual or personal in nature.” Klos v. Gockel, 87 Wash.2d 567, 570, 554 P.2d 1349 (1976). The determinative factor is whether the builder is “regularly engaged in building” and, thus, a sophisticated, commercial vendor-builder. Id. at 570, 554 P.2d 1349. Thus, the defendant in a breach of implied warranty of habitability case must be a commercial builder so that the sale is a commercial one, rather than casual or personal in nature. Id.

¶ 11 In Boardman v. Dorsett, 38 Wash.App. 338, 341, 685 P.2d 615 (1984), the vendor had built the house he sold to the buyer and had built one other house, his family home. The vendor was not, however, a licensed general contractor. The buyer sued for breach of the implied warranty of habitability. Affirming summary judgment for the vendor, this Court explained, “A commercial builder is a person regularly engaged in building.... Mr. Boardman was not a licensed building contractor and had only built one other house-his family home. Since it is clear from the evidence presented that Mr. Boardman was not a commercial builder, no factual dispute existed and the court did not err in granting summary judgment on this issue.” Id. at 341–42, 685 P.2d 615.

¶ 12 Here, Mr. Engelhard happened to be a licensed real estate agent who had been involved in “two or three small commercial projects” in the past. CP at 39. He was not a licensed building contractor. For the Richland home, Mr. Engelhard hired Castle Builders as general contractor for the home's construction. If a builder like the Boardman defendant could not be a commercial builder, a vendor like Mr. Engelhard, who did not build the house but instead hired a general contractor, cannot be either.

¶ 13 Relying on House, the Montgomerys argue a vendor who hires a contractor to construct a home can nevertheless be subject to the implied warranty of habitability. But, there, the defendant real estate broker and his general contractor had “entered into a copartnership and agreement to construct” the residence. House, 76 Wash.2d at 429, 457 P.2d 199 (emphasis added). Under the law then in effect, the partnership was bound by one partner's wrongful act, and each partner was jointly and severally liable therefor. 1955 WASH. LAWS ch. 15, §§ 25.04.130, .150(1). Thus, in House, the conduct of the general contractor was imputable to his partner, the real estate broker, as a matter of law. In general, non-builder developers and vendors typically retain general contractors to do the actual construction because the vendors lack building expertise. This may explain why Washington courts have limited the applicability of the implied warranty of habitability to vendor-builders.

¶ 14 Summary judgment is proper if reasonable minds could reach but one conclusion from the evidence. Bostain v. Food Express, 159 Wash.2d 700, 708, 153 P.3d 846 (2007). Because Mr. Engelhard did not have a builder's license, was not an experienced developer, and was not regularly engaged in building, reasonable minds could reach but one conclusion; he was not the builder-vendor of the Richland home. Thus, the Montgomerys...