Daily Development for Monday, July 29, 2002

By: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
prandolph@cctr.umkc.edu

VENDOR /PURCHASER; NEW HOMES; IMPLIED WARRANTY: Massachusetts finds that an implied warranty of habitability attaches to the sale of new homes by builder-vendors, and while the scope of the warranty is largely a case by case determination, a home that is unsafe because it deviates from fundamental aspects of applicable building codes, is structurally unsound, or fails to keep out the elements because of construction defects, would breach the implied warranty, which survives the passing of title and cannot be waived.

Albrecht v. Clifford 767 N.E.2d 42 (Mass 2002).

In 1993, Plaintiffs bought a newly-constructed single family home, with nine fireplaces, from Defenant, an architect and general contractor. There was a negotiated one year warranty on the fireplaces. Several years later, the Plaintiffs learned of defects in the fireplaces and chimneys of another house built by Defendant. Plaintiffs hired an inspector, who found similar problems with their home. Following the inspection, Plaintiffs filed a complaint in Massachusetts Superior Court asserting the following claims against Defendant: breach of contract; breach of an implied warranty that the house was constructed in a good and workmanlike manner; fraud and deceit; negligent misrepresentation; and violation of G.L. 93A.

A superior court judge granted Defendant's motion for summary judgment for all of Plaintiffs' claims. Plaintiffs appealed. The appeal was transferred to the Supreme Judicial Court of Massachusetts ("SJC") on its own motion in order to consider whether an implied warranty arises out of a contract for the sale of a newly constructed residence by a builder-vendor. While the SJC adopted such an implied warranty of habitability (the "Warranty"), it also affirmed the summary judgment rulings. The SJC cited various policy considerations of jurisdictions that recognize such a warranty, such as assuring that consumers get what they bargain for: an "objectively habitable home;" protecting buyers from structural defects that are almost impossible to discover by inspection after the home is built; and imposing the burden of repairing latent defects on the person with the opportunity to notice, avoid or correct them, that is, the builder.

The SJC then set forth the elements necessary to establish a breach of the Warranty: a plaintiff must show that (a) plaintiff purchased a new home from the builder-vendor, (b) the house contained a latent defect; (c) the defect manifested itself only after its purchase; (d) the defect was caused by the builder-vendor's improper design, material, or workmanship; and (e) the defect created a substantial question of safety or made the house unfit for human habitation.

The court refused to place limits on judicial discretion to find that a given defect violates the warranty. It merely set general parameters:

"While the scope of the warranty must be left largely to case-by-case determination, a home that is unsafe because it deviates from fundamental aspects of the applicable building codes, or is structurally unsound, or fails to keep out the elements because of defects of construction, would breach the implied warranty we adopt today."

The court then turned to Plaintiffs' claims.

The first stumbling block the SJC hit upon was that the necessity that the defects be "latent". The court stated that the defects were "in some measure readily observable . . . the Albrechts' expert did not have to dismantle them or any other part of the residence." However, the court did recognize that "some of the observations were more difficult than others and were made with the assistance of video equipment." Ultimately, however, the court concluded that even if a cause of action for the violation of the Warranty did exist, the Plaintiffs were barred from doing so because they did not raise the issue within the three year statute of limitations.

The SJC did not allow the Plaintiffs to invoke the discovery rule, which tolls a limitations period until a "prospective plaintiff learns or should have learned that he has been injured". There are three situations where this rule could arise: a misrepresentation concerns a fact that is "inherently unknowable" to the injured party; a wrongdoer breaches some duty of disclosure; or a wrongdoer conceals the existence of a cause of action through an affirmative act done with the intention to deceive. The Plaintiffs would have to demonstrate that they did not know of the defect within the statute of limitations and that "in the exercise of reasonable diligence, they should not have known." The SJC concluded that Plaintiffs could not meet such a burden, finding that, "it is unreasonable as a matter of law for the [Plainitffs] neither to inspect nor to use the fireplaces when they knew that express warranty on the fireplaces and chimneys, which they had negotiated, lasted only one year."

Comment 1: Note the narrow interpretation suggested (but not applied) by the court for the concept of a "latent defect." The court suggests strongly that problems in a newly constructed home that are discoverable only by an inspection by a qualified professional are nonetheless "obvious" defects and are not actionable at all under the implied warranty of habitability, whether or not they meet the "discovery rule"

standard.

Comment 2: The discovery rule analysis would apply only to defects that met the threshold "latency" requirement. It is unclear whether the test for what is "undiscoverable" for purposes of the discovery rule is the same as the test for what is "latent" in order for a cause of action to exist at all. Certainly some latent defects later will become discoverable, thus triggering the running of the statute. But can a defect be "latent" but nevertheless "discoverable?" Or vice versa? Is there any reason to differentiate between the two tests? It would be nice if the court had cleared up this meddle. But hey - it's tort law. Certainty is not necessarily a virtue.

Comment 3: Note that the implied warranty of habitability here is pure consumer law. It is non-waivable and is in addition to any express warranties contained in the contract.

Comment 4: The court noted that the majority of American jurisdictions have adopted similar warranties in the 40 years since the concept first appeared in Colorado. But many other courts do have clearer standards as to what constitutes a breach of warranty, and not all the implied warranties are non-waivable, as is the case here.

Readers are urged to respond, comment, and argue with the daily development or the editor's comments about it.

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