Nastri v. Wood Bros. Homes, Inc., 2

• Decision Date: 16 October 1984
• Docket Number: No. 2,CA-CIV,2
• Citation: 690 P.2d 158,142 Ariz. 439
• Parties: Robert NASTRI and Barbara Nastri, husband and wife, Plaintiffs/Appellants, v. WOOD BROS. HOMES, INC., an Arizona corporation, Defendant/Appellee. 5035.
• Court: Arizona Court of Appeals

Page 158

690 P.2d 158

142 Ariz. 439

Robert NASTRI and Barbara Nastri, husband and wife, Plaintiffs/Appellants, v. WOOD BROS. HOMES, INC., an Arizona corporation, Defendant/Appellee.

No. 2 CA-CIV 5035.

Court of Appeals of Arizona Division 2.

Oct. 16, 1984.

Dennis A. Rosen, Tucson, for plaintiffs/appellants.

Stinson & Douglas, P.A. by William H. Douglas, Phoenix, for defendant/appellee.

OPINION

BIRDSALL, Chief Judge.

This appeal arises out of a summary judgment entered by the trial court dismissing the appellants' complaint against the appellee, Wood Bros. Homes, Inc. The appellants, Robert and Barbara Nastri, husband and wife, are the second purchasers of a home constructed by the appellee. Their claim for relief, set forth in multiple counts in the complaint, alleges that latent defects in the construction have caused severe damage to the home. The only issues raised on appeal concern the dismissal of their counts in strict liability, negligence, and the implied warranty of construction in a workmanlike manner and habitability. They do not dispute the summary disposition of their counts in fraud, false advertising, conspiracy to defraud, and consumer fraud.

The trial court did not have the benefit of our supreme court's decision in Richards v. Powercraft Homes, Inc., 139 Ariz. 242, 678 P.2d 427 (1984), and undoubtedly based its decision, in part at least, on the fact that the appellants were not the first purchasers of the home. In Richards the court held that privity of contract with the builder was not a prerequisite for an action arising out of an implied warranty that construction has been done in a workmanlike manner and that the structure is habitable.

The residence was constructed by the appellee as part of a tract development of 42 lots in a subdivision. The previous owner had subdivided the raw land for development, but had done no grading, planting, digging, or movement of soil. It had secured an engineering soil report which it delivered to the appellee. The report contained the following language:

Because of the extremely collapsible nature of the surface soil it will be necessary to water, scarify and re-compact the surface soil to a depth of 18 inches below the existing ground surface, or to the "caliche" layer, whichever applied. (emphasis added)

The home was sold to Mr. and Mrs. Ernest E. Gurule by written purchase contract dated February 20, 1978. They sold it to the appellants in March 1980. The complaint was filed December 4, 1981. The Gurule-Wood Bros. contract contained the following provision:

10. THE IMPROVEMENTS CONSTRUCTED ARE COVERED BY LIMITED WARRANTIES AS FOLLOWS: ALL LABOR HAS BEEN PERFORMED IN A GOOD AND WORKMANLIKE MANNER IN COMPLIANCE WITH THE APPLICABLE BUILDING CODE AND, WHEN APPLICABLE, FHA OR VA STANDARDS. SELLER WILL MAKE REPAIRS AND/OR REPLACEMENTS DUE TO DEFECTIVE MATERIALS OR WORKMANSHIP, IF NOTICE OF SUCH IS GIVEN IN WRITING TO SELLER WITHIN ONE (1) YEAR FROM THE DATE OF OCCUPANCY BY PURCHASERS. THE WARRANTIES HEREIN SHALL NOT APPLY TO DAMAGES OR DEFECTS AS A RESULT OF ORDINARY WEAR AND TEAR, NATURAL DISASTER, CHANGES MADE TO GRADE ELEVATION OR STRUCTURE BY PURCHASERS, OR ANY NEGLIGENT ACTS OF PURCHASERS. NO OTHER WARRANTIES, EXPRESS OR IMPLIED, ARE GIVEN, INCLUDING, BUT NOT LIMITED TO, A WARRANTY OF FITNESS FOR HABITATION, QUALITY OR CONDITIONS, EXCEPT AS EXPRESSLY GIVEN HEREIN. THE PROVISIONS OF THIS PARAGRAPH SHALL SURVIVE THE CLOSING AND TRANSFER OF TITLE. Warranty to extend for a period of 2 years.

Sometime after the appellants occupied the home, they observed problems which they described in deposition testimony as:

1. Crack in the kitchen floor going through the pantry, all the way through the kitchen floors down the middle. The crack is 12 feet [sic] by 20 feet.

2. A difference in elevation around the crack between one side of the kitchen floor and the other side of the kitchen floor.

3. Crack in the family room that exists from the edge of the foundation near the stem wall. The crack is 1/4 of an inch.

4. Crack in the vinyl flooring. 5. Extensive crack in the fourth bedroom extending from the stem wall in the foundation, the length of the room and into the corner of the closet. The crack is 3/8 inches wide all the way through. It goes all the way through to the ground. Ants are coming up underneath the padding of the carpeting below the house.

6. Buckling of the roof over the second and third bedrooms.

7. Joist cracked.

8. Pantry door cannot be locked (door does not fit due to movement). Front door is hard to lock for the same reason.

9. Cracks in the bricks through the archway in the front of the house (through the slump block as opposed to cracks in the mortar).

10. Widening of the wall crack in the family room next to the fireplace where Wood Bros. attempted repairs. Crack in the ceiling of the kitchen.

11. Cracks in the entryway that go along the wall and interior wall on through to the family room, cracks on the outside in the bricks of the fourth bedroom, 3/8 inch crack extending into the kitchen from outside on the raised foundation where the house was built from the garage.

12. Crack in the cement pad.

13. Crack in kitchen causing separation of tile.

14. Cracks in drywall, prior cracking in sheet of linoleum floor which began as a split in the seam in the linoleum.

15. Crack in the drywall ceiling of the family room.

16. Separation between the brick and drywall near the fireplace.

By deposition the soils engineer testified that soil settling caused the cracking. An engineering firm employed by the appellants made the following statement in its report:

Based on the observed damage of the residences and results of field and laboratory investigations, it is concluded that the three residences were built on top of about 2 to 4 feet of moisture sensitive "collapsible" soil. Moisture infiltration due to landscape watering, ponding of rain water, and/or utility leaks are believed to have caused the settlement. It is probable that additional increases in soil moisture content would continue to cause foundation movement with resulting wall and floor slab cracking. ¹

We must consider the record presented to the trial court on the motion for summary judgment in the light most favorable to the appellants. Hall v. Motorists Insurance Corp., 109 Ariz. 334, 509 P.2d 604 (1973). In that light it cannot be disputed that, at the very least, latent defects in the construction relating to the soil compaction and/or the foundation of the home caused damage to the structure.

Since we hold that the trial court judgment must be reversed, we must decide on which of the three remaining legal theories the case may be tried, i.e., implied warranty, negligence, and strict liability.

Implied Warranty

Despite the Richards decision, the appellee presents two arguable reasons for affirming the judgment dismissing the count in implied warranty. First, the appellee contends that the disclaimer in the contract with the first purchaser, Gurule, negates the implied warranty claimed by the appellants. We do not agree. This argument was not presented in the trial court, probably because Richards v. Powercraft, which overruled previous Arizona law, had not been decided. Therefore no facts have been developed concerning the circumstances leading to the Gurule contract. It appears from an examination of the instrument that it was a contract of adhesion and for that reason might be unenforceable depending on the real agreement between the parties. See Darner Motor Sales, Inc. v. Universal Underwriters Insurance Co., 140 Ariz. 383, 682 P.2d 388 (1984). See also Petersen v. Hubschman Construction Co., 76 Ill.2d 31, 27 Ill.Dec. 746, 389 N.E.2d 1154 (1979) (disclaimer strictly construed against builder).

Further, there is authority holding that an express warranty for a limited time cannot displace the implied warranty of habitability in a case involving latent defects. In Tassan v. United Development Co., 88 Ill.App.3d 581, 43 Ill.Dec. 769, 410 N.E.2d 902 (1980), a group of condominium owners sued the builder-developer because major systems such as central heating and plumbing were faulty. The sales contract had an express warranty limiting repairs to one year. The court held that even a conspicuous clause disclaiming liability may not be enough to show, in fact, such disclaimer was part of the agreement reached and that the buyer understood the consequences of such a waiver in relation to latent defects. In addition, the Illinois court also considered the builder's defense that the express warranty covering the same subject matter as the implied warranty rendered the implied warranty nonactionable. The court stated:

Latent defects in a new home or a new condominium may well not be discovered until after the first year a buyer takes possession. To allow a one year express warranty to entirely displace an implied warranty of habitability could have the effect of allowing a seller to disclaim the implied warranty without forcing him to prove that there was a knowing acceptance of such disclaimer on the part of the buyer. All a seller would need to do is to provide an express warranty in the written contract covering all defects for a period of one year, six months, or even a month. Thus, the seller could preclude any liability for latent defects without the buyer knowing that such liability has been precluded. 410 N.E.2d at 910.

See also Terlinde v. Neely, 275 S.C. 395, 271 S.E.2d 768 (1980), where the builder paid a sum of money to the original buyer to correct damages caused by the settlement of the house and received a release. The South Carolina Supreme Court nevertheless permitted an action of a subsequent purchaser to proceed on breach of implied warranty and negligence.

We are not called upon to decide any dispute between the original purchaser and Wood Bros. Nor can we affirm the summary judgment against the appellants on this theory, which is...