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Posts Tagged ‘breach of contract’
Pennsylvania Appellate Court Holds Builder’s Implied Warranty of Habitability Extends to Subsequent Purchasers
by HDlawblog Posted: Friday, 1/11/2013The Superior Court of Pennsylvania recently held, in the matter of Conway v. Cutler Group, Inc., that a builder’s implied warranty of habitability extends beyond the initial purchaser to subsequent purchasers of a home.
In the Conway case, the second homeowners of a house built in 2003 discovered water infiltration around windows in their master bedroom approximately two years after they purchased the home. The second homeowners smartly retained an engineering and architecture firm to assess the water infiltration problems. Someone from the firm inspected the second homeowner’s home and prepared a report stating that the home suffered from several defects that required correction.
Thereafter the second homeowners filed a one count complaint against the builder of their home asserting a claim for breach of the implied warranty of habitability. [Note: Keep in mind that the second homeowners could not sue the builder for breach of contract because, as second purchasers, they never had a contract with the builder.]
At the trial level, the builder successfully argued for the dismissal of the complaint on the basis that the implied warranty of habitability only extends from the builder to the initial purchaser. The second homeowners appealed to the Superior Court of Pennsylvania. The Superior Court of Pennsylvania found that the question of whether a builder’s implied warranty of habitability extends to subsequent purchasers of a home was an issue of first impression, meaning it was an issue that had not been heard by the court before.
In holding that a builder’s implied warranty of habitability applies to subsequent purchasers of a home, the court reasoned that the purpose of the implied warranty of habitability is to equalize the disparate positions of the builder and the average home purchaser by safeguarding the reasonable expectations of the purchaser. According to the court, it would be nonsensical not to extend the implied warranty of habitability to subsequent purchasers because subsequent purchasers are in no better of a position than initial purchasers to discover latent defects with a home and to hold otherwise would create absurd results. For example, the court stated that to rule otherwise would create a result where an original homeowner could recover under the theory of breach of the implied warranty of habitability where the initial homeowner discovered defects with the home five years after it was built, but a second purchaser could not recover if it discovered the same defects, in the same home, five years after it was built.
While this opinion may certainly alarm homebuilders, the court did point out that the implied warranty of habitability only covers defects which would not be apparent to the ordinary purchaser as a result of a reasonable inspection. Therefore, in the Conway case, if the second homeowners should have been able to discover the water infiltration issues as a result of a reasonable inspection, the builder could have argued that the implied warranty of habitability should not have applied. Moreover, while it may be cold comfort to builders, all homeowners, regardless of whether they are a first or subsequent purchaser, must bring a claim for breach of the implied warranty of habitability within the 12-year period of the statute of repose.
This article is authored by attorney Shannon O. Young and is intended for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice. Any particular questions should be directed to your legal counsel or, if you do not have one, please feel free to contact us.
Residential Contractors Rejoice: A Lack of a Written Home Improvement Contract Does Not Necessarily Bar Recovery
by HDlawblog Posted: Friday, 11/2/2012In 2009, Pennsylvania enacted the Home Improvement Consumer Protection Act (“HICPA”), which act mandated, among other things, that residential contractors enter into written home improvement contracts with homeowners in order to protect homeowners from contractors taking their money and leaving town without doing the work. Under the statutory language of the HIPCA if a contractor does not enter into a written contract with a homeowner, the contractor is barred from pursuing a breach of contract action against the homeowner because the statute states that no home improvement contract shall be valid or enforceable against an owner unless it is in writing, legible, and contains the home improvement contractor registration number of the contractor performing the work. [Disclaimer: there are also other requirements that a home improvement contract needs to meet].
Many people who read the HICPA reasonably interpreted it to mean that if a residential contractor did not enter into a written home improvement contract with the homeowner, it was not possible for the residential contractor to recover money owed as a result of the contractor’s work. Thus, it seemed like the HIPCA imposed a particularly harsh penalty on contractors who performed work on a property without a written home improvement contract. Many of our clients lamented that this new statute was simply unfair to contractors.
Fortunately, our legal system is structured in such a way that courts can sculpt the effect of statutes via interpretive opinions that shed light on grey areas. This is precisely what happened late this summer when the Superior Court of Pennsylvania issued an opinion in Durst v. Milroy General Contracting, Inc. In this case, the homeowners contracted a residential contractor to perform home improvements and the parties entered into an oral contract. After the residential contractor completed the work, he submitted a written invoice to the homeowners and a dispute arose. The homeowners refused to pay the residential contractor any money.
The contractor decided to sue, but the lack of a written contract complicated matters. Initially, the contractor’s lawyer filed a complaint against the homeowners alleging counts of breach of contract and quantum meruit, but the attorney smartly amended the complaint to allege only a count for quantum meruit because, as discussed above, the lack of a written contract would have made any breach of contract action dismissible.
By way of background, quantum meruit, a Latin phrase meaning “what one has earned” is an equitable remedy to provide restitution for unjust enrichment in the amount of the reasonable value of one’s services. Where unjust enrichment is found, the law implies a contract, which requires the defendant to pay to the plaintiff the value of the benefit conferred.
The homeowner’s attorney then sought to dismiss the contractor’s complaint on the grounds that it was an attempt to collect on an oral home improvement contract, which attempt is strictly prohibited by the HICPA. The homeowner’s lawyer further argued that the HICPA also precludes residential contractors from collecting on a quantum meruit theory. The trial court refused to dismiss the contractor’s case ruling that the HIPCA was silent regarding whether a contractor could pursue a quantum meruit claim where a contractor performed services with no written contract and was left completely uncompensated. Upset with that ruling, the homeowners essentially got the trial court’s permission to appeal the decision to the Superior Court of Pennsylvania on the grounds that the HICPA is a new statute with no interpretative precedent.
On appeal, the Superior Court of Pennsylvania considered whether the HICPA precludes lawsuits where home improvement work was conducted, but no written contract exists and the contractor is seeking to recover under a quantum meruit theory. In agreeing with the trial court’s decision, the Superior Court noted that the contractor’s complaint alleged that the contractor conferred a benefit on the homeowners in the form of home improvements and that the homeowners accepted and retained at least some of those home improvements under circumstances that would make it inequitable for the homeowners to retain the home improvements without compensating the contractor.
Under such circumstances, the PA Superior Court concluded that the homeowner’s reliance upon the HICPA as a defense in its action was misplaced because the contractor was not pursuing a contract theory; rather the contractor’s lawsuit was based on a quantum meruit theory. The court noted that although the HICPA requires a written home improvement contract in order to maintain a breach of contract action, the HICPA is silent as to actions in quasi-contract, such as unjust enrichment and quantum meruit, which by definition implicate that for whatever reason, no written contract existed between the parties. Thus, the Court held that quasi-contract theories of recovery survive the HICPA and the trial court did not err in allowing the contractor to move forward with his claims.
This case is a win for residential contractors. If you or your company need assistance with the preparation of a home improvement contractor or any other construction law related matter, the attorneys at Harmon & Davies, P.C. are here to serve you.
This article is authored by attorney Shannon O. Young and is intended for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice. Any particular questions should be directed to your legal counsel or, if you do not have one, please feel free to contact us.
Superior Court of Pennsylvania Holds Homebuilder Personally Liable
by HDlawblog Posted: Wednesday, 4/18/2012The Superior Court of Pennsylvania recently upheld a York County jury verdict that found a homebuilder personally liable for defective construction work. In Bennett et al. v. A.T. Masterpiece Homes at BroadSprings, LLC et al., two sets of homeowners who purchased new residential homes from A.T. Masterpiece Homes at Broadsprings, LLC (“A.T. Masterpiece”), sued the limited liability company and its managing member, Grant Colledge, in his individual capacity, for breach of contract, breach of warranty, and violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law (“UTPCPL”) alleging that the defendants engaged in deceptive and dishonest practices during the construction process.
The homeowners alleged that during the construction of their homes they noticed numerous building deficiencies and that Colledge, who was the homeowners’ primary contact during the construction process, made certain assurances to them in the form of statements akin to: “I guarantee it” or “I will take care of it.” For example, when one of the homeowners noticed that the dormer above his garage did not correspond to building plans and structural design, Colledge assured the homeowner that the dormer had been redesigned and the final product would work fine. In another instance, a homeowner visited her home to check on its progress and noticed a crack in the foundation. When the homeowner reported the crack to Colledge, he stated that he “will take care of it and will take care of you.” Colledge made other guarantees regarding issues with the flooring and repeated his intention to take care of both the specific problem and the homeowner’s general concerns.
After construction finished, the homeowners discovered that their new homes were in various states of disrepair and structural failure. The dormer that had been an issue on one of the homes was in such bad structural shape that the homeowner had to install temporary bracing to avoid collapse. There were other alleged deficiencies including nails protruding from sections of drywall, cracked tiles, and floors being so poorly laid that a person could feel the joints move while walking.
The homeowners retained an engineering expert who found similar construction defects and housing code violations in each home. The deficiencies included: using poor grade lumber, improperly installing the floor joists, and housing code violations related to the insulation, height clearances, ventilation, plumbing, and electrical systems.
At trial, the jury found Colledge and his company liable for breach of contract, breach of warranty, and violations of the UTPCPL. The jury further concluded that Colledge’s representations and guarantees regarding the homes exposed him to personal liability and awarded the homeowners double the damages under their UTPCL claims.
Colledge appealed his case to the Superior Court of Pennsylvania arguing that the trial court erred: (1) by permitting the jury to hold him personally liable to the homeowners when he did not specifically agree to assume liability; (2) by holding him personally liable when there was no evidence of fraudulent conduct by him; and (3) by doubling the jury’s award under the UTPCPL when the Court itself did not view Colledge as an absolute crook.
Colledge argued that he should be shielded from personal liability because he was at all times acting only as an agent on behalf of a limited liability company. Colledge claimed that any statements attributed to him (where he said “I will take care of it” or “I guarantee it”) were simply figures of speech and did not amount to express assumptions of personal liability. The Superior Court disagreed and found that there was ample evidence presented at trial to lead the jury to find that Colledge had assumed personal liability.
The Court noted that the several occasions where Colledge had reassured the homeowners that he would take care of their concerns and made express promises guaranteeing the quality of their homes did not take place in a vacuum but in the context of recurring building deficiencies which arose during construction of the homes. The court stated that although the homeowners officially contracted with A.T. Masterpiece, Colledge voluntarily assumed personal liability on the building contract when he guaranteed the final quality of the home because the statements were intended to calm the homeowners about the building deficiencies and to maintain their contracts.
Moreover, the Superior Court found that there was sufficient evidence to support the jury’s finding of liability under the UTPCPL because the jury was not required to find proof of common law fraud to find that Colledge had engaged in misleading conduct under the UTPCPL. Again, the facts presented at trial showed that Colledge made numerous specific representations to the homeowners regarding the construction and ultimate quality of their homes. Despite such guarantees, Colledge failed to deliver the quality he promised to the homeowners and the homeowners received brand new homes in need of many thousands of dollars in repairs. The jury heard this evidence and concluded Colledge’s conduct was deceptive or misleading. Thus, the court found that the evidence at trial was sufficient to support the jury’s finding.
This case is concerning not only for contractors, but for any business owners who make statements such as “I guarantee it.” In light of this decision, Pennsylvania small business owners should be particularly careful about the assures that they give to clients or else they may find themselves personally liable.
This article is authored by attorney Shannon O. Young and is intended for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice. Any particular questions should be directed to your legal counsel or, if you do not have one, please feel free to contact us.
