Warner v. Design and Build Homes, Inc.
| Decision Date | 10 May 2005 |
| Docket Number | No. 30722-7-II.,30722-7-II. |
| Citation | 128 Wash. App. 34,114 P.3d 664,128 Wn. App. 34 |
| Court | Washington Court of Appeals |
| Parties | Curtis E. WARNER and Ana T.C. Warner, husband and wife, Appellants, v. DESIGN AND BUILD HOMES, INC., a Washington Corporation; Betty Siemens Eades; Ronald H. Kruse and Karen Kruse, husband and wife; Omega Pacific Lath & Plaster, Inc., a Washington Corporation; Unknown Subcontractors identified as A to Z; and DJR Framing, a Washington business, Respondents, Nash Landscaping, a Washington Corporation; North Country Concrete, a Washington corporation; RK Construction, a Washington business; TJ Roofing, an Oregon Corporation; and Sunrise Gutter Service, Inc., a Washington Corporation, Third-Party Defendants. |
Keith Hisao Hirokawa, David Max Phillips, Mark Alan Erikson, Mark A. Erikson Attorney at Law PLLC, Vancouver, WA, for Appellants.
Steven A. Kraemer, Mark Elgin Olmsted, Attorney at Law, Janet M. Schroer, Hoffman, Hart & Wagner, Robert E. Sabido, Thomas M. Christ, Cosgrove, Vergeer, Kester, LLP, Portland, OR, Alfred E. Donohue, Ray P. Cox, Forsberg & Umlauf PS, Seattle, for Respondents.
Steven A. Kraemer, Ruth Casby Rocker, Hoffman, Hart & Wagner, Portland, OR, for Plaintiff Design & Building Homes Inc.
Christopher John Drotzmann, Portland, OR, for Defendant TJ Roofing.
¶ 1 After Curtis and Ana Warner discovered structural defects and significant mold growth in their new home, they sued Design and Build Homes, Inc. (Design) and Omega Pacific Lath & Plaster, Inc. (Omega). The Warners asserted that Design, as the builder-vendor, had breached the implied warranty of habitability. As to Omega, the subcontractor, the Warners maintained that they were third-party beneficiaries under the contract between Omega and Design, therefore entitled them to bring a claim for breach of an implied warranty of workmanlike construction. The trial court granted Design and Omega's motion for summary judgment and the Warners appeal. Because the Warners are not third-party beneficiaries to the contract between Design and Omega and because they disclaimed all implied warranties when they purchased the property "as is," we affirm.
¶ 2 In March 1999, the Warners entered into a purchase and sale agreement with Design for the sale of a new home. The agreement, drafted by the Warners' real estate agent, included a clause stating that the Warners had inspected the property and agreed to purchase the property "in its present `as is' condition." Clerk's Papers (CP) at 25. An addendum to the agreement also stated that the sale was conditioned on the Warners' approval of a general building inspection report. The addendum provided that the Warners could decline to purchase "on the basis of any condition identified in the inspection report that the inspector recommends be corrected." CP at 28. If the inspector recommended further evaluation of the home by a specialist, then the addendum gave the Warners additional time to complete this further evaluation. The addendum also gave Design the option to preserve the contract for sale by correcting any condition disapproved by the Warners.
¶ 3 The Warners had the home inspected. The inspection report contained the following findings and recommendations: (1) "[e]xterior wall cracks" and "bulging in the stucco" on the rear wall, which "should be further evaluated to verify that a problem does not exist, and what correction is needed to repair/seal the cracks;" (2) "evidence of past water in the crawl space at the north wall," which should be monitored; and (3) the "flashing at the front wall ... should be checked, due to the potential of water leaking into the stucco." CP at 415-16. The inspection report recommended that a certified professional engineer complete a further evaluation "where there are structural concerns about the building" because "[a]ssessing the structural integrity of a building is beyond the scope of a typical home inspection." CP at 415.
¶ 4 The Warners declined to have a further evaluation completed, but they did request that Design repair certain conditions identified in the inspection report. These conditions included the exterior wall cracks and defects in the flashing and stucco. After these conditions were repaired, the Warners completed a walk-through inspection and closed the sale of the property.
¶ 5 In September 2001, the Warners began noticing leaks and water damage inside the home. They hired a professional stucco consultant who concluded that the water intrusion was due to defective stucco installation. The Warners also hired an industrial hygienist to evaluate mold contamination in the interior of the home. The hygienist concluded that the water intrusion had led to a significant presence of "several potentially toxic species of airborne fungi" throughout the house. CP at 247.
¶ 6 The Warners moved out of the home when it became apparent that Ana Warner and the Warner children were having allergic reactions to the mold. The Warners then hired an engineer and construction company to repair and replace the exterior siding as well as damaged structural components. The engineer eventually concluded that "substantial water intrusion [had] ... resulted in substantial rot and fungal growth" which had caused "structural damage to the sheathing and framing components of the Residence." CP at 352-53. The engineer opined that if the water intrusion, rot, and fungus had been allowed to continue, the home would have collapsed within a reasonably foreseeable period.
¶ 7 In November 2001, the Warners sued Design and Omega. Design had subcontracted with Omega to install the stucco siding. The Warners alleged that Design had breached the implied warranty of habitability and Omega had breached a warranty of workmanlike construction implicit in the contract between Omega and Design, to which the Warners claimed damages as third-party beneficiaries. The trial court granted Design and Omega summary judgment against the Warners.1 The Warners appeal.2
¶ 8 The Warners assert that the trial court erred in granting summary judgment to Design and Omega. This appeal turns on two issues: (1) whether the "as is" clause in the Warners' purchase and sale agreement waived all implied warranties, including the warranty of habitability; and (2) whether the Warners are third-party beneficiaries to the contract between Omega and Design. These are questions of law which we review de novo. CR 56(c); Dep't of Labor & Indus. v. Fankhauser, 121 Wash.2d 304, 308, 849 P.2d 1209 (1993).
"AS IS" CLAUSE AND WAIVER OF THE IMPLIED WARRANTY OF HABITABILITY
¶ 9 The contract between the Warners and Design required the Warners' approval of a general building inspection report. If this report listed problems with the home, Design could correct them. If the report recommended further evaluation, the Warners could delay closing on the property so that the evaluation could be completed. Under the purchase and sale agreement, the Warners agreed to purchase the property "as is" if (1) no conditions were identified in the report and a further evaluation was not recommended; or (2) Design repaired any conditions, identified in either the report or the further evaluation, which the Warners wanted fixed. Satisfaction of one of these two alternatives was a condition precedent to the Warners' agreement to purchase the home "as is."
¶ 10 Although the inspection report recommended further structural evaluations of the home, the Warners did not conduct them. The Warners did request that certain conditions in the inspection report be fixed. It is undisputed that Design honored the Warners' request. These decisions triggered the purchase and sale agreement's "as is" clause.
¶ 11 An "as is" clause means that the buyer is purchasing property in its present state or condition. Olmsted v. Mulder, 72 Wash.App. 169, 176, 863 P.2d 1355 (1993), review denied, 123 Wash.2d 1025, 875 P.2d 635 (1994). "The term [`as is'] implies that the property is taken with whatever faults it may possess and that the seller or lessor is released of any obligation to reimburse the purchaser for losses or damages that result from the condition of the property." Olmsted, 72 Wash.App. at 176, 863 P.2d 1355. Because a warranty disclaimer is not favored in the law, it must meet two conditions to be effective: (1) it must be explicitly negotiated or bargained for; and (2) it must set forth with particularity what is being disclaimed. Puget Sound Fin., L.L.C. v. Unisearch, Inc., 146 Wash.2d 428, 438, 47 P.3d 940 (2002). An "as is" clause is generally inserted in a contract by the seller and the negotiation and particularity requirements are designed to protect a buyer who, not being in a position of equal bargaining power, is forced into signing a contract prepared by the seller that may contain fine print and boilerplate language. Olmsted, 72 Wash.App. at 176, 863 P.2d 1355; Lyall v. DeYoung, 42 Wash.App. 252, 257, 711 P.2d 356 (1985), review denied, 105 Wash.2d 1009 (1986).
review denied, 111 Wash.2d 1007 (1988). But the Warners maintain that the "as is" clause is ambiguous and, therefore, ineffective and unenforceable, because it does not explicitly state the warranties being disclaimed. We disagree.
¶ 13 "[U]nless the circumstances indicate otherwise, all implied warranties are excluded by expressions like `as is', `with all faults' or other language which in common understanding calls the buyer's...
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