Johnson v. Healy

Brief Fact Summary.

Johnson (Plaintiff) purchased a house from its builder, John Healy (Defendant), and the house settled in such a way as to cause major damage to foundation walls.  The Plaintiff sued, alleging misrepresentation and negligence on the part of the builder-vendor.  

Synopsis of Rule of Law.

The proper test for damages was the difference in value between the property had it been as represented and the property as it actually was.  

Facts.

The trial court found for the Plaintiff on claims of misrepresentation and for the Defendant on the grounds of negligence, and awarded damages.

The Plaintiff’s claim for damages was $882.50 for sewer repairs damaged by the settling of the foundation, plus $27,150 for a new foundation.  The trial court’s award in the amount of $5,000 was for breach of warranties and not for negligence.  The Plaintiff attacked the award as inadequate, and Defendant attacked it as excessive because it did not measure the difference in the value of the property as warranted and as sold. 

Issue.

Should Defendant have been liable for representations inducing the Plaintiff to purchase the home, in the absence of written warranties?
Were the claims for negligence sustainable?
Was the award for damages correct?

Held.

Judgment set aside and remanded for a new trial limited to the issue of damages. 

·         Yes, the trial court properly found Defendant liable for his innocent misrepresentations about the home.  His statement that there was “nothing wrong” with the house could have been reasonably interpreted by the Plaintiff that he had factual information to justify his opinion. 

·         The building inspector had no notice of the lot’s instability, and the evidence supported the trial court’s conclusion that Defendant also had no notice.  Without constructive notice, Defendant was not negligent.

·         The correct award for damages was the difference in value between the property had it been as represented and the property as it actually was.

Dissent.

None.

Concurrence.

None.

Discussion.

This case demonstrates an extension of warranty liability for innocent misrepresentation to a builder-vendor who sells a new home.