Frickel v. Sunnyside Enterprises, Inc.

Brief Fact Summary.

A few years after Plaintiffs purchased a building from Defendant, Plaintiffs discovered that the building’s foundations were inadequate and improperly designed for the soil on which it was built. Plaintiffs sued Defendant for a breach of the implied warranty of habitability. The trial court determined that the structural defects were not reasonably discoverable through investigation even by an expert contractor. The court thus found that there was an implied warranty of habitability and that Defendant breached it. Defendant appealed, and the appellate court referred the case to the Supreme Court of Washington.

Synopsis of Rule of Law.

In the sale of a new house and only if the new building is built for the purpose of sale by a commercial builder, a vendor-builder impliedly warrants that the home is structurally safe for habitation and that the foundations of the structure are firm and secure.

Facts.

Sunnyside (Defendant) was a professional developer who always built their properties for themselves to own and manage rather than for sale. Nevertheless the Frickels (Plaintiffs), with the advice of counsel, were able to execute an agreement of sale for an apartment building that Defendant had constructed to provide income during their retirement. The contract stipulated that the Plaintiffs fully inspected the property and that neither Defendant nor its successors or assigns could be held to any covenant respecting the condition of the building. A few years after the sale, Plaintiffs discovered that the building’s foundations were inadequate and improperly designed for the soil on which it was built, even though Defendant built it to the exact specifications demanded by the city. The defective construction would cost $330,000 to repair; otherwise the foundation would fail in eight or nine years.

Issue.

Whether in the sale of a new house, does a vendor-builder impliedly warrant that the home is structurally safe for habitation and that the foundations of the structure are firm and secure.

Held.

Yes. The trial court’s ruling is reversed. In the sale of a new house and only if the new building is built for the purpose of sale by a commercial builder, a vendor-builder impliedly warrants that the home is structurally safe for habitation and that the foundations of the structure are firm and secure.

Dissent.

(Pearson, CJ.): This court has never suggested that warranty protection depended on whether a purchaser wanted the property for personal use or as an investment. If one considers the policy justifications for why the implied warranty exists at all—imbalance of expertise, knowledge, and bargaining position—Defendant should be held to have warranted the building’s fitness. Plaintiffs have no experience buying real estate other than the purchase of their home thirty years ago. The structural defects were not reasonably discoverable even to an expert contractor. A buyer should be able to expect a commercial builder to have properly constructed a building even if it was not meant for sale.

Discussion.

The implied warranty of habitability does not apply to every sale of a new house. Here, the Plaintiffs approached Defendant, who built the building according to the city’s exact specifications. Plaintiffs were represented by counsel and had the opportunity and means to properly inspect the property but chose not to do so. They were looking for a commercial investment, not a home for personal use. Most importantly, there is no dispute that Defendant did not build the building with an intent to sell it.