Pracht v. Rollins

• Decision Date: 31 August 1989
• Docket Number: No. 89-83,89-83
• Parties: Dale H. PRACHT and Jeanne M. Pracht, Husband and Wife, Plaintiffs and Appellants, v. Scott S. ROLLINS and Ladonna K. Rollins, Husband and Wife, Defendants and Respondents.
• Court: Montana Supreme Court

Page 57

779 P.2d 57

239 Mont. 62

Dale H. PRACHT and Jeanne M. Pracht, Husband and Wife Plaintiffs and Appellants, v. Scott S. ROLLINS and Ladonna K. Rollins, Husband and Wife Defendants and Respondents.

No. 89-83.

Supreme Court of Montana.

Submitted on Briefs July 20, 1989.

Decided Aug. 31, 1989.

Jon A. Oldenburg, Lewistown, for plaintiffs and appellants.

Timothy J. O'Hare, Lewistown, for defendants and respondents.

GULBRANDSON, Justice.

Plaintiffs, Dale H. and Jeanne M. Pracht, filed a complaint in the District Court of the Tenth Judicial District, Fergus County, seeking specific performance of a contract for deed dated August 14, 1984. Defendants, Scott S. and LaDonna K. Rollins, filed a counterclaim, seeking rescission of the contract due to a breach of the implied warranty of habitability and workmanship. The District Court, sitting without a jury, entered judgment for defendants. Plaintiffs appeal. We affirm in part, reverse in part and remand.

The issues raised on appeal are:

1. Whether the District Court erred by determining that plaintiffs breached the implied warranty of habitability.

2. Whether the District Court erred by rescinding the contract for deed due to failure of consideration.

Dale H. and Jeanne M. Pracht, current residents of Wisconsin, owned and still own in fee simple absolute a house built by Dale H. Pracht and located in Fergus County, Montana. Dale H. Pracht is a pharmacist by profession but built and sold two other houses prior to the house that is the subject of this case. After building the house during 1982 and 1983, the Prachts advertised the house for sale in 1984 as a "newer high-tech solar home." The Prachts sold the property and house located thereon to Scott S. and LaDonna K. Rollins for $65,000 via a contract for deed dated August 14, 1984. The Rollinses paid $7,500 as a downpayment and commenced to make the monthly payments on the house beginning in August, 1984.

The Rollinses moved into the house shortly after signing the contract for deed. Beginning in December, 1984, the Rollinses became alerted to a possible humidity problem in the house. The Rollinses first discovered that cloth items they stored in a closet of the house for approximately four months were moldy and had to be thrown away. Other problems slowly manifested themselves throughout 1985 and 1986. Specifically, during the summer of 1985, the Rollinses noticed that the paint was beginning to peel off the deck, supposedly as a result of using green lumber, and a few of the boards on the deck were curling up. The Rollinses also began to notice that when they closed the doors and windows in the house, they expanded and were therefore very hard or even impossible to open or close again. This problem was also attributed to the humidity problem found within the house.

Near the end of 1985 or the beginning of 1986, the Rollinses noticed that the siding of the house started to pull away from where it was joined together. After the siding began to give way, the Rollinses then noticed that the house was not sheathed underneath or braced with plywood; as a result, gaps began to form in the siding. The Rollinses also noticed that the garage roof began to leak; that mold was growing in several window and closet areas; that the window sills began to crack; and that during the winter of 1986-87 the foundation of the house began to separate from the backfill soil. Scott Rollins also testified that he suspected a wiring defect in the house because light bulbs did not seem to last in the house and because they had to have their microwave repaired four different times. According to the repairman, the microwave breakdowns occurred as a result of power surges.

The Rollinses initially took steps to repair and fix the problems, including venting the clothes dryer outside and putting in a new window in the basement. However, in light of all of the problems that began to appear after the Rollinses bought the house, they finally made a decision in late December of 1986 or early January of 1987 to move out of the house. Beginning in June, 1987, and after contacting an attorney, the Rollinses ceased making payments under the contract for deed. The Rollinses, via their attorney, sent a notice to the Prachts on July 7, 1987 stating that the house was noticeably deteriorating and that it was becoming uninhabitable. The Rollinses then demanded cancellation of the contract and a refund of their downpayment. The Prachts responded in October, 1987 by filing a lawsuit seeking specific performance of the August 14, 1984 contract for deed in the District Court of the Tenth Judicial District, Fergus County. The Rollinses filed a counterclaim, seeking rescission of the contract for deed due to a breach of the implied warranty of habitability and workmanship. The Rollinses then remained in the house until October, 1988 without making any further payments.

The District Court, sitting without a jury, found that the house was not constructed in a workman-like manner or according to the Uniform Building Code; that the defects the Rollinses discovered in the house were not readily apparent when they bought the house and did not begin to appear until December, 1984; that the Rollinses relied upon the Prachts' representations that they were capable of building, and did build a "high-tech" energy efficient house; and that neither Scott nor LaDonna Rollins were knowledgeable in the construction of houses. The court then concluded that the Prachts breached the implied warranty of habitability and workmanship in building the house; that the breach was material and constituted a condition entitling the Rollinses to stop making their payments under the contract for deed; that the Prachts, as the builder-vendor of the house, were in a better position to have prevented the improper construction of the house and to have avoided the problems; and that the Rollinses were entitled to rescission of the contract which therefore entitled them to recover their $7,500 downpayment. The court, however, allowed the Prachts to retain the monthly payments made by the Rollinses from August, 1984 through May, 1987 as reasonable rent. The District Court then entered judgment for the Rollinses on January 4, 1989. The Prachts appeal from this judgment.

The first issue raised on appeal is whether the District Court erred by determining that the Prachts breached the implied warranty of habitability.

This Court first recognized the implied warranty of habitability in 1982 in Chandler v. Madsen (1982), 197 Mont. 234, 642 P.2d 1028. In Chandler, the evidence demonstrated that the house was uninhabitable due to inoperative doors, windows, and locks; cracked walls and floors; broken windows; bent plumbing; uneven and bulged floors; separation between fixtures and walls; cracked bathroom tiles; and a settlement of the foundation by 3.6 inches in some areas. We therefore abandoned the doctrine of caveat emptor and adopted the implied warranty of habitability. We held that a builder-vendor of a new house impliedly warrants that the house is constructed in a workman-like manner and is suitable for habitation. Chandler, 197 Mont. at 239, 642 P.2d at 1031. In a subsequent case, Degnan v. Executive Homes, Inc. (1985), 215 Mont. 162, 696 P.2d 431, we upheld the application of the implied warranty of habitability. In Degnan, the house in question suffered from structural damage as a result of it being built on unstable ground. We again emphasized that the theory behind the implied warranty of...