Case Title: Schepps v. Howe

Citation: 

Docket Number: 5826

State: wyoming

Court: Wyoming Supreme Court

Date: 1983-06-22T00:00:00Z

Document:
Schepps v. Howe1983 WY 71665 P.2d 504Case Number: 5826Case Number: 5826Decided: 06/22/1983Supreme Court of Wyoming
David P. SCHEPPS and 
Theresa L. Schepps, Appellants (Plaintiffs),

v.

Steve R. HOWE and Jerri 
Jean Howe, Appellees (Defendants). No. 5826

Appeal from District 
Court, NatronaCounty, Dan Spangler, 
J.

C. Edward 
Webster II, Cody, for 
appellants.

William W. 
Harden, Casper, 
for appellees.

Before ROONEY, C.J., and RAPER,* THOMAS, ROSE, and BROWN, 
JJ.

* Retired June 13, 1983, 
but continued to participate in the decision of the court in this case pursuant 
to order of the court entered June 13, 1983.

THOMAS, 
Justice.

[¶1.]     In this case the court 
is confronted with two questions concerning the rights of purchasers of 
residences. The first question relates to the right to recover in fraud for 
misrepresentations made subsequent to the execution of a contract for the sale 
of the residence. The second involves the right of a purchaser to claim a 
warranty of habitability when the house is constructed by the seller for his own 
occupancy and the seller is not a professional builder-developer. In granting a 
summary judgment in favor of the seller the district court held that any false 
representation could not have been relied upon by the buyers to induce them to 
purchase the property since any such representations were made after a binding 
contract to purchase the property was formed. The district court further held 
that no warranty of habitability attaches to the sale of a home by the builder, 
if the seller who constructed the home is an amateur builder who is not 
intending to engage in a commercial venture at the time the home is built. We 
shall affirm the district court, but in so doing we will hold that in this case 
the buyers waived any possible warranty of habitability, and, although we are 
skeptical of the ruling by the district court, we will defer for another 
occasion the question of whether a warranty of habitability could attach under 
these circumstances.

[¶2.]     In urging their 
position in this court the appellants (the buyers) phrase the issues presented 
as follows:

"1. Did the district 
court of NatronaCounty err in granting 
summary judgment in favor of appellees holding that appellees were not 
responsible for not disclosing any defects in the home to be purchased by 
appellants. Were appellees exempt from responsibility for fraudulently 
misrepresenting the manner in which the home was constructed because the parties 
had previously entered into a purchase offer, acceptance and receipt agreement 
and appellants had made an earnest money deposit.

"2. Did the district 
court of NatronaCounty err in granting a 
summary judgment in favor of appellees and against appellants holding that an 
amateur builder of a home is exempt from constructing a home in a workmanlike 
manner and further exempt from an implied warranty of habitability and 
workmanship."

In defending the 
appeal the appellees (the sellers) rely upon traditional grounds for protecting 
summary judgments. In so doing they state the pertinent issues as 
follows:

"A. Whether or not the 
Court erred in finding there was no genuine dispute as to any material fact 
regarding Plaintiff's allegations of fraud?

"B. Whether or not the 
Court erred in finding there was no dispute as to any material fact regarding 
Plaintiff's allegation of breach of implied warranty of habitability and 
negligent construction?"

[¶3.]     We begin by noting that 
in considering the propriety of the grant of summary judgment this court views 
the record in the light most favorable to the party against whom the summary 
judgment was entered, giving to that party the benefit of all favorable 
inferences which can be drawn from any of the materials which are submitted in 
support of or in opposition to the motion. Hyatt v. Big Horn School District No. 4, 
Wyo., 636 P.2d 525 (1981); Strang Telecasting, Inc. v. Ernst, Wyo., 610 P.2d 1011 (1980); Weaver v. Blue Cross-Blue 
Shield of Wyoming, Wyo., 609 P.2d 984 (1980); and Bluejacket v. Carney, Wyo., 550 P.2d 494 
(1976). We also note that in an appeal in a case in which a summary judgment has 
been granted by the district court, our task is identical to that of the 
district court. Reno Livestock 
Corporation v. Sun Oil Company, Wyo., 638 P.2d 147 (1981); Hyatt v. Big Horn School 
District No. 4, supra; Bancroft v. 
Jagusch, Wyo., 611 P.2d 819 (1980); and Centrella v. Morris, Wyo., 
597 P.2d 958 (1979). Whether the district court properly awarded the summary 
judgment to the moving party depends upon the dual findings that there is no 
genuine issue of material fact, and that the prevailing party is entitled to 
judgment as a matter of law. Reno Livestock Corporation v. Sun Oil 
Company, supra; Weaver v. Blue 
Cross-Blue Shield of Wyoming, supra; Laird v. Laird, Wyo., 597 P.2d 463 (1979); Johnson v. Soulis, Wyo., 
542 P.2d 867 (1975). According to our holdings a fact is material if proof with 
respect to it would have the effect of establishing or refuting one of the 
essential elements of a cause of action or a defense asserted by one of the 
parties. Hyatt v. Big Horn School District No. 4, supra, 636 P.2d  at 
528; Laird v. Laird, supra, 597 P.2d  
at 466; Timmons v. Reed, Wyo., 569 P.2d 112 
(1977); and Johnson v. Soulis, supra, 
542 P.2d  at 872. The party submitting the motion for the summary judgment has 
the burden of establishing that there are no genuine issues of material fact and 
that he is entitled to judgment as a matter of law. Hyatt v. Big Horn School District No. 4, 
supra, 636 P.2d  at 528; Weaver v. Blue 
Cross-Blue Shield, supra, 609 P.2d  at 987; and Laird v. Laird, supra, 597 P.2d  at 466. 
When the moving party supports his motion by affidavit as provided in Rule 
56(e), W.R.C.P.,1 and supplements the affidavits as 
provided in that rule, the other party may not rest upon the mere allegations or 
denials of his pleading. He is required to respond, by affidavit or otherwise, 
and he must set forth specific facts which show that there is a genuine factual 
issue for trial. Hyatt v. Big Horn School 
District No. 4, supra; Harris v. 
Grizzle, Wyo., 625 P.2d 747 (1981); Keller v. Anderson, Wyo., 554 P.2d 1253 (1976); and Newton v. Misner, Wyo., 
423 P.2d 648 (1967).

[¶4.]     Having followed the 
foregoing principles we conclude that certain facts in this case are not in 
dispute. The appellees, Steven Howe and his wife, Jerri, were residents of Park 
County, Wyoming, and they were engaged in the construction of their own home in 
Park County when Steven Howe accepted a job offer in Casper, Wyoming. The 
unfinished house was being constructed from plans obtained from Lumber 
Enterprises, Inc., of Bozeman, Montana. Although some trained assistance was 
obtained with respect to certain aspects of the construction, most of the 
construction work including the wiring, plumbing, and erection of the walls was 
done by Steven Howe, who had no previous experience in the construction trade. 
All work on the house was suspended when Steven Howe accepted the offer of 
employment in Casper, Wyoming.

[¶5.]     At that juncture the 
property was listed for sale with the Pronghorn Agency, Inc., of Cody, Wyoming, 
which acted as the agent for the sellers until the property was sold to the 
appellants (the Schepps). The uncompleted house was placed on the market, that 
is it was listed, advertised and sold, on an "AS IS" basis. It was understood 
that the materials which were required to finish the construction would be 
furnished to any buyers as a part of the transaction. The cash asking price for 
this partially completed residence and the property on which it was located 
declined over the time between listing and sale.

[¶6.]     The appellants first 
saw the home when it was shown to them by the realtor without the appellees 
being present. On September 6, 1979, the appellants signed an "Offer, Acceptance 
& Receipt (Specific Performance Contract) (Residential)" which was accepted 
and signed later on the same day by the appellees. The purchase price which the 
appellants offered was $82,500 subject to only a contingency of obtaining 
financing. The receipt of $500.00 as earnest money and part payment was 
acknowledged by the broker-agent upon execution of the offer. The parties then 
met for the first time on the date of closing, September 11, 1979. David 
Schepps, in his affidavit, asserts that on that occasion he was assured by 
Steven Howe that the house had been built by qualified contractors and was 
complete structurally except for some finish work. In addition the appellants 
state by way of affidavit that they were assured that the cost of finishing the 
house according to a written estimate was less than $6,000; that the house 
complied with the building and electrical codes and had passed inspection by a 
qualified inspector; and that the electrical and plumbing work had been done by 
competent professionals. Not long after they took possession the appellants 
began to experience problems with the home. A portion of the roof blew off. They 
then had the property inspected by a licensed building contractor, and the 
inspector informed the appellants that the building would not pass the state 
building code inspection. He also advised them that the state electrical 
inspector should be called to examine the house. In making a subsequent 
inspection the electrical inspector noted 52 violations of the state electrical 
code, and that inspector also advised the appellants not to use the heating 
system in the house until it had been corrected because of the possibility of a 
fire. The plumbing in the house collapsed and had to be completely redone. 
Numerous other problems arose as a result of the poor construction of the home, 
all of which required correction at great expense to the 
appellants.

[¶7.]     The appellants began 
this present action on February 10, 1981. The appellees answered and 
affirmatively alleged a counterclaim for malicious prosecution. The answer 
generally denied the allegations of the appellants' complaint, and following 
discovery the appellees moved for summary judgment pursuant to Rule 56, W.R.C.P. 
Summary judgment was granted by the district court on January 22, 1982. The 
summary judgment did not treat with the counterclaim for malicious prosecution, 
however, and when the case first was appealed the appeal was dismissed because 
the judgment was not final. That matter was corrected upon remand to the 
district court, and the summary judgment is now before this court upon 
appeal.

[¶8.]     In two separate 
decision letters the district court comments:

"The undisputed facts are 
that the parties entered into a contract on September 6, 1979, and did not meet 
until closing on September 11, 1979. By that time, Plaintiffs were already 
obligated to perform, before any representations had been made by Defendants. 
Thus, Plaintiffs could not have relied on any statements made by Defendants 
before Defendants accepted the offer, at which time there was a contract binding 
both sides."

"[T]he Defendants are not 
builders of new homes for purpose of sale, . . . and that the Defendants are 
entitled to judgment as a matter of law."

These 
conclusions are significant with respect to the issues as posed by the 
appellants. Implicit in the second comment is a conclusion that as a matter of 
law an implied warranty of habitability would not apply to the sale of a 
residence by an amateur builder.

[¶9.]     One of the grounds upon 
which the appellants sought relief was that of fraud. They asserted a right to 
recover damages for alleged fraudulent misrepresentations made in connection 
with their purchase of the property from the appellees. We recognized in our 
recent decision in Hagar v. Mobley, 
Wyo., 638 P.2d 127 (1981), that fraudulent misrepresentations as to material 
facts can give rise to the remedy of recision of a contract for the sale of real 
property. Before this remedy is available, however, our legal precedents made it 
clear that certain elements must be established. First, the buyer is required to 
prove in a clear and convincing fashion that the seller misrepresented a 
material fact to him. Second, the buyer must establish that these 
representations were relied upon by the buyer in entering into the contract and 
that such reliance was reasonable. Third, the buyer must establish that as a 
result of his reliance upon the false representations he suffered injury. Hagar v. Mobley, supra, 638 P.2d  at 137; 
Reynolds v. Tice, Wyo., 595 P.2d 1318 
(1979); Johnson v. Soulis, supra, 542 P.2d  at 872; Davis v. Schiess, Wyo., 
417 P.2d 19 (1966); and First National 
Bank of Cheyenne v. Swan, 3 Wyo. 356, 23 P. 743 (1890). In connection with 
the requirement of reasonable reliance we have recognized that false 
representations in order to constitute actionable fraud must occur prior to the 
execution of the contract which is sought to be avoided or for which damages are 
sought to be recovered. Johnson v. 
Soulis, supra; and Waters v. 
Trenckmann, Wyo., 503 P.2d 1187 (1972).

[¶10.]  Our examination of the materials before 
the district court at the time the summary judgment was granted discloses that 
the misrepresentations which are complained of occurred after the contract had 
been formed. It is undisputed that the appellants did not meet or have any 
contact with the appellees until after September 6, 1979. September 6, 1979, is 
the date that the parties executed the "Offer, Acceptance & Receipt" which 
the appellants sought to avoid in this action.

[¶11.]  The contract was complete when the 
appellees accepted the appellants' offer to purchase within the time provided in 
the contract. The agreement gives the parties the right to specific performance 
in addition to the remedies in the case of breach. The final paragraph provided: 

"THIS IS A LEGALLY 
BINDING CONTRACT, IF YOU DO NOT UNDERSTAND THE TERMS AND CONDITIONS, CONSULT 
LEGAL COUNSEL."

Under these 
facts the district court properly concluded that the appellants were bound by 
contract to purchase the house at the time their offer was accepted by the 
appellees. Madison v. Marlatt, Wyo., 
619 P.2d 708 (1980); Crockett v. 
Lowther, Wyo., 549 P.2d 303 (1976); State v. Kunimoto, 62 Haw. 502, 617 P.2d 93 (1980); cf. Elder v. Jones, Wyo., 
608 P.2d 654 (1980).

[¶12.]  The documentation before the district 
court might well create a triable issue as to whether the misrepresentations 
which are complained of actually occurred, but this issue of fact cannot 
interfere with our affirmance of the district court's grant of the summary 
judgment. Even if such misrepresentations of fact did occur, they were made 
after the contract had been executed. As a matter of law such misrepresentations 
cannot form the basis of actionable fraud because they could not serve as an 
inducement to the buyers in entering into the contract. As this court said in Schaffer v. Standard Timber Company, 79 
Wyo. 137, 331 P.2d 611, 615 (1959):

"* * * A party preparing 
to consummate a contract cannot be heard to complain if he fails to make 
reasonably diligent inquiry regarding the facts. * * *"

Any issue with 
respect to the misrepresentations is not material to the disposition of this 
case. Since the only misrepresentations that are relied upon were made 
subsequent to the time of the contract, any issue with respect to whether such 
representations were made would not be an issue of a material fact. As to this 
aspect of the summary judgment the district court must be 
affirmed.

[¶13.]  With respect to the second issue asserted 
by the appellants, it is uncontroverted in the record that the listing, 
advertisement, and sale of the appellees' property which is in issue was on an 
"AS IS" basis. It further is not disputed that this disclaimer was brought to 
the attention of the appellants and agreed to by them. The basis of their 
bargain on the record before us in this case was a sale made "AS IS." For the 
purposes of this appeal we hold that there was an effective waiver of any 
implied warranty of habitability with respect to the sale of the partially 
completed residence. See Petersen v. 
Hubschman Construction Co., 76 Ill. 2d 31, 27 Ill.Dec. 746, 389 N.E.2d 1154 
(1979); Crowder v. Vandendeale, Mo., 
564 S.W.2d 879 (1978); and Tibbets v. 
Openshaw, 18 Utah 2d 442, 425 P.2d 160 (1967). Appellants failed to provide 
competent evidence which would be admissible at trial controverting the 
affidavits and deposition testimony of the appellees that the parties intended 
and agreed that the sale would be "AS IS." Harris v. Grizzle, supra; Cantonwine v. Fehling, Wyo., 582 P.2d 592 (1978); and Hunter v. Farmers 
Insurance Group, Wyo., 554 P.2d 1239 (1976). With the record in that state, 
we must affirm the grant of the summary judgment by the district court although 
on a different ground from that which the district court apparently adopted, 
because as a matter of law the appellees were entitled to judgment on that 
claim.

[¶14.]  We, of course, are entitled to premise 
the affirmance on any proper legal ground appearing from the record. ABC Builders, Inc. v. Phillips, Wyo., 
632 P.2d 925 (1981); Wightman v. American 
National Bank of Riverton, Wyo., 610 P.2d 1001 (1980). In this instance, the 
record before us discloses the proper ground for affirming the district court to 
be that of waiver of the warranties. In this regard we note the provisions of § 
34-21-233(c), W.S. 1977, which are indicative of this state's policy.2

[¶15.]  While the waiver proposition does not 
require us to deal with the apparent assumption by the district court that a 
warranty of habitability would not extend to an instance in which the builder is 
not one who is engaged in the building of new homes for sale as a commercial 
venture, we feel compelled to comment upon this proposition. Beginning with Tavares v. Horstman, Wyo., 542 P.2d 1275 
(1975), this court has been among the leaders in the development of the doctrine 
of implied warranty of habitability with respect to the sale of new housing. We 
have extended the protection of the implied warranty of habitability to 
subsequent purchasers against not only builder-developers, but also against 
those who hold themselves out as builders. Moxley v. Laramie Builders, Inc., Wyo., 
600 P.2d 733 (1979). We have recognized the existence of an alternative cause of 
action for negligence in an instance in which the facts indicated that the 
original builder had breached its duty by failing to select a safe site for 
construction. ABC Builders, Inc. v. 
Phillips, supra; Moxley v. Laramie 
Builders, Inc., supra; Tavares v. 
Horstman, supra. In the process we have acknowledged the existence of a 
public policy protecting the victims of shoddy workmanship against those upon 
whom home buyers should be entitled to rely in making what will be for most of 
them the largest and most important purchase of their 
lifetimes.

[¶16.]  We recognize that some jurisdictions have 
refused to extend the protection of the implied warranty of habitability to 
situations similar to the present case in which a builder constructed a home for 
his own use and he later changed his mind and decided to sell it to another. See 
Capra v. Smith, Ala., 372 So. 2d 321 (1978); Mazurek v. Nielsen, 42 Colo. App. 
386, 599 P.2d 269 (1979); Yepsen v. Burgess, 269 Or. 635, 525 P.2d 1019 (1974); 
Elderkin v. Gaster, 447 Pa. 118, 288 A.2d 771 (1972); Bolkum v. Staab, 133 Vt. 
467, 346 A.2d 210 (1975); and Klos v. Gockel, 87 Wn.2d 567, 554 P.2d 1349 
(1976). Under these cases the courts generally require that before the implied 
warranty of habitability arises there must be a commercial sale analogous to a 
sale by a merchant under the provisions of the Uniform Commercial Code. See 
Bolkum v. Staab, supra, and § 34-21-204(a) and § 34-21-231, W.S. 1977. Were the 
case squarely before us we are not sure that we could follow the exception 
announced by those courts. We perceive much of the rationale underlying the 
adoption of the rule of implied warranty of habitability to be applicable to 
so-called casual sales by home builders. The superior knowledge and ability of 
the builder to discover and prevent latent defects does not disappear simply 
because the person is building the home with the original intention of residing 
in it himself. The policy of protecting innocent purchasers from the ravages of 
shoddy workmanship should not necessarily depend on who built the structure or 
upon the subjective purpose for the construction. In many instances it would be 
merely fortuitous that someone who had intended to live in the home was not able 
to do so, and he should not be able to shift the responsibility for latent 
defects created by shoddy workmanship to the shoulders of an innocent and 
unsuspecting purchaser. We find much merit in the comment of the Colorado 
Supreme Court in Sloat v. Matheny, Colo., 625 P.2d 1031, 1034 (1981), as 
follows:

"* * * To hold otherwise 
would sanction the casual avoidance of these implied warranties by a builder who 
could easily feign the construction of a home for personal use and then sell the 
home on the open market * * *."

[¶17.]  It makes sense in the case of a completed 
structure to apply the same rules to those building for commercial sale and 
those who build for their own use and later sell. The buyer in either instance 
has the same problem of discovery of latent defects. In a case such as this in 
which the structure is not completed the defects are discoverable by the buyer. 
Indeed, the electrical inspector discovered the 52 violations of the electrical 
code on a walk-through inspection.

[¶18.]  Concluding that the fraudulent 
misrepresentations which are asserted were not material to the formation of the 
contract, and that the buyers waived any warranties in this situation, it is our 
determination that the judgment of the district court be 
affirmed.

FOOTNOTES

1 Rule 56(e), W.R.C.P., 
provides:

"(e) Form of affidavits; further testimony; 
defense required. - Supporting and opposing affidavits shall be made on 
personal knowledge, shall set forth such facts as would be admissible in 
evidence, and shall show affirmatively that the affiant is competent to testify 
to the matters stated therein. Sworn or certified copies of all papers or parts 
thereof referred to in an affidavit shall be attached thereto or served 
therewith. The court may permit affidavits to be supplemented or opposed by 
depositions, answers to interrogatories, or further affidavits. When a motion 
for summary judgment is made and supported as provided in this rule an adverse 
party may not rest upon the mere allegations or denials of his pleading, but his 
response, by affidavits or as otherwise provided in this rule, must set forth 
specific facts showing that there is a genuine issue for trial. If he does not 
so respond summary judgment, if appropriate, shall be entered against 
him."

2 Section 34-21-233(c), 
W.S. 1977, provides in pertinent part:

"(i) Unless 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 attention to the exclusion of warranties and 
makes plain that there is no implied warranty; * * *"