Case Title: Deisch v. Jay

Citation: 

Docket Number: 89-57

State: wyoming

Court: Wyoming Supreme Court

Date: 1990-04-19T00:00:00Z

Document:
Deisch v. Jay1990 WY 41790 P.2d 1273Case Number: 89-57, 89-58Decided: 04/19/1990Supreme Court of Wyoming
GORDON DEISCH, 
INDIVIDUALLY, REGENCY CONSTRUCTION, A CORPORATION, PATIO HOMES PARTNERSHIP, AND 
BETTY TUTTLE, INDIVIDUALLY, 

APPELLANTS 
(DEFENDANTS),

v.

AMOS JAY, JEAN JAY, 
ROBERT E. HIMES AND EVELYN HIMES, 

APPELLEES 
(PLAINTIFFS).

 

 AMOS JAY, JEAN JAY, ROBERT E. HIMES, AND 
EVELYN HIMES,

 APPELLANTS (PLAINTIFFS), 

v. 

GORDON DEISCH, 
INDIVIDUALLY REGENCY CONSTRUCTION, A CORPORATION, PATIO HOMES PARTNERSHIP, AND 
BETTY TUTTLE, INDIVIDUALLY, 

APPELLEES 
(DEFENDANTS).

Appeal from the District 
Court, Laramie County, Nicholas G. Kalokathis, J.

Steven F. 
Freudenthal of Herschler, Freudental, Salzburg, Bonds & Rideout, P.C., 
Cheyenne, for appellants in No. 89-57 and appellees in No. 
89-58.

Robert B. 
Carroll, Cheyenne, for appellees No. 89-57 and appellants in No. 
89-58.

Before 
CARDINE, C.J., and THOMAS, MACY, GOLDEN, JJ., and WOLFE, D.J.

GOLDEN, Justice.

[¶1]      The major issue 
in this appeal concerns the nature of a residence builder-vendor's implied 
warranty of workmanship and fitness for habitation given to the residence 
owner.

[¶2]      The 
builder-vendor of two townhouses appeals the court's judgment awarding money 
damages to two homeowners in their action which alleged that the builder-vendor 
had negligently constructed their townhouses or had breached an implied warranty 
of workmanship and fitness for habitation. Cross-appealing, the two homeowners 
claim that they received inadequate damages awards.1

[¶3]      We affirm in all 
respects.

[¶4]      In its appeal, 
builder-vendor states the issues in this way:

1. Whether the scope and 
meaning of the implied warranty of habitability for a residence adopted by the 
trial court - whether a reasonable person faced with such a defect would be 
warranted in concluding that a major impediment to habitation existed - is the 
proper legal standard under Wyoming law?

2. If the legal standard 
adopted by the trial court is correct, whether the trial court properly applied 
the standard to conclude that a defect which would "discourage" improvements 
such as a basement bedroom constituted a major impediment to habitation when the 
trial court had previously concluded that the townhomes were habitable and the 
"basements are likewise habitable, at least as presently used?"

3. Whether the judgment 
of the trial court can stand when the evidence most favorably construed to the 
plaintiffs was that Plaintiffs held a subjective belief that the alleged defect 
prevented improvements to their unfinished basements satisfactory to 
them?

4. Whether the Plaintiffs 
Jays failed to mitigate their damages with regard to the band 
instruments?

5. Whether the trial 
court's findings and judgment are clearly erroneous, unsupported by or contrary 
to the evidence, or against the great weight of the evidence?

[¶5]      Homeowners assert 
the issues as follows:

I. Does the scope of the 
implied warranty of habitability in Wyoming require a residence to be totally 
uninhabitable?

II. Did plaintiffs take 
reasonable steps to mitigate the damages to their basements and 
property?

[¶6]      In the 
homeowners' cross-appeal, the homeowners state the sole issue as:

"Were Plaintiffs awarded 
adequate compensation for costs of repairs to their basements?"

[¶7]      Builder-vendor 
states the issue as:

Was there sufficient 
evidence to support the trial court's findings with respect to 
damages?

FACTS

[¶8]      Regency 
Construction Company, Inc. (Builder-vendor), in 1982-83 constructed residential 
townhomes in the vicinity of Carlson and Sycamore Streets in Cheyenne, Wyoming. 
Builder-vendor sold one of these townhomes directly to Mr. and Mrs. Amos Jay 
(Jays). Builder-vendor sold another of these townhomes to Mr. and Mrs. Arthur 
Schliske, who in turn sold the townhome to Mr. and Mrs. Robert E. Himes 
(Himes).

[¶9]      Both the Jays and 
the Himes experienced excessive humidity and dampness problems in their 
basements which resulted in the development of mold and mildew and an offensive 
odor. Some of their personal property stored in the basement was damaged. As a 
result, they brought an action on May 11, 1988, against Builder-vendor alleging 
negligent construction of their townhomes and breach of an implied warranty of 
habitability. For relief, they sought either specific performance to correct 
basement defects or money damages to compensate them for the loss of value of 
their townhomes or removal and replacement of their basement floors or for loss 
of use of their basements. They did not seek rescission and 
restitution.

[¶10]   At the bench trial, both parties 
introduced lay and expert testimony concerning the existence, nature and extent, 
and cause of the excessive humidity and dampness in the basements. They also 
introduced expert evidence about the appropriate repairs and costs of repairs. 
As to be expected, the parties' evidence was in conflict on many of these 
matters. Not in conflict, however, was that neither the Jays nor the Himes was 
forced by the alleged defects to abandon living in their townhomes and using in 
normal fashion the areas apart from the basements.

[¶11]   Sorting through the conflicting 
evidence, the trial court concluded that, more likely than not, a perched water 
table in the ground underlying the basements existed as a source of moisture 
from which capillary action was fed, leading to excessive humidity and dampness 
in the basements. Further, the trial court concluded that the builder-vendor's 
evidence on the appropriate remedy of installing a capillary break and on the 
cost of that remedy was reasonable under all the circumstances. As a result of 
these conclusions, the trial court found in favor of the homeowners on their 
theory of breach of an implied warranty of habitability, but not on their theory 
of negligent construction. Each homeowner was awarded the sum of $1,980 for 
diminution in value of their townhome. Additionally, the Jays were awarded $765 
for personal property damages and the Himes were awarded $87.04 for certain 
repair bills. These appeals followed.

ANALYSIS

1. 
BUILDER-VENDOR'S APPEAL

[¶12]   Builder-vendor mounts a 
double-edged attack on the judgment in favor of the homeowners. First, the 
builder-vendor claims that the trial court departed from this court's rule of 
liability for the breach of an implied warranty of habitability first 
established for new homeowners in Tavares v. Horstman, 542 P.2d 1275 (Wyo. 1975) 
and then extended to subsequent purchasers in Moxley v. Laramie Builders, Inc., 
600 P.2d 733 (Wyo. 1979). Builder-vendor states the rule to be that an implied 
warranty of habitability is breached only by major defects which render the 
house unfit for habitation. Using that statement of the rule, the builder-vendor 
then argues that the evidence showed no major defects existed in either townhome 
and neither townhome was unfit for habitation. Second, the builder-vendor claims 
that the evidence showed that the Jays failed to mitigate their personal 
property damages for which they were awarded $765. We shall discuss each claim 
in order.

·        
Implied Warranty of 
Habitability

[¶13]   Builder-vendor incorrectly states 
the rule of implied warranty of habitability adopted by this court in Tavares. 
There, the purchasers of a new home sued the land developer-builder-vendor to 
recover $2,083 which the purchasers spent to correct a defective septic system. 
The purchasers sought money damages, not rescission of the sale transaction and 
restitution. After reviewing decisions from other jurisdictions in which many 
courts had adopted an implied warranty rule, we discarded the rule of caveat 
emptor and embraced this rule: "[W]here a vendor builds new houses for the 
purpose of sale, the sale carries with it an implied warranty that it is 
constructed in a reasonably workmanlike manner and is fit for habitation." 
Tavares, 542 P.2d  at 1282. In the course of its review of the decisions from 
other jurisdictions, this court quoted with approval from Bethlahmy v. Bechtel, 
91 Idaho 55, 415 P.2d 698, 711 (1966):

The implied warranty of 
fitness does not impose upon the builder an obligation to deliver a perfect 
house. No house is built without defects, and defects susceptible of remedy 
ordinarily would not warrant rescission. But major defects which render the 
house unfit for habitation, and which are not readily remediable, entitle the 
buyer to rescission and restitution.

Tavares, 542 P.2d  at 1281.

[¶14]   Thus, we see that the implied 
warranty rule accommodates either a recovery of money damages for minor defects 
susceptible of remedy or rescission and restitution for major defects which 
render the house unfit for habitation and which are not readily 
remediable.

[¶15]   In Moxley, the second homeowner 
sued to recover $3,892 for electrical rewiring and $20 for the cost of the state 
safety inspection. Like the homeowners in Tavares, Moxley did not seek 
rescission and restitution. In reinstating the amended complaint which alleged a 
breach of an implied warranty of fitness and habitability, this court reiterated 
the Tavares rationale:

Courts will judicially 
protect the victims of shoddy workmanship. Consumer protection demands that 
those who buy homes are entitled to rely on the skill of the builder and that 
the house is constructed so as to be reasonably fit for its intended 
use.

* * * * * *

It is the structure and 
all its intricate components and related facilities that are the subject matter 
of the implied warranty.

* * * * * *

     The purpose of a 
warranty is to protect innocent purchasers and hold builders accountable for 
their work.

Moxley, 600 P.2d  
at 735-36.

[¶16]   In Anderson v. Bauer, 681 P.2d 1316 
(Wyo. 1984), this court again reviewed liability under the implied warranty 
rule. Although reversing the developer's liability, this court affirmed the 
builder's liability for money damages to eight homeowners whose basements had 
received water seepage. Each homeowner testified about the water seepage, the 
resulting damage, the dampness, and the inability to use or inhabit the 
basement. Id. at 1323. The corrective action considered necessary included 
installation of drain tile around foundations and removal and replacement of two 
out of eight basement floors. Affirming the damages awards, this court reviewed 
the rules for recovery of damages in cases involving damage to realty. In cases 
of permanent injury or great cost of repair, the measure of damages is the 
difference between the value of the property before and after the injury. In 
cases of temporary injury or small cost of repair, the measure of damages is the 
cost of repair. This court also noted that the diminished value of the property 
is recoverable, in cases in which a public awareness of the particular problem 
exists. Id. at 1324.

[¶17]   Regardless of whether the injury is 
permanent or temporary in nature, these kinds of damages cannot be determined 
with mathematical precision and may be inherently uncertain. Id. All that is 
required is "that they be determined with a reasonable degree of certainty based 
upon the evidence adduced and the nature of the injury." Id. at 
1325.

[¶18]   From these cases no rule emerges 
that, as builder-vendor here contends, an implied warranty of habitability is 
breached only by major defects which render the house unfit for habitation. 
Instead, the unmistakable rule in cases like the present one is that an implied 
warranty of habitability and fitness is breached if the homeowner proves the 
existence of a minor construction defect and a resulting temporary injury to the 
property. The measure of damages is the cost of repair, but may also include the 
diminished value of the property. The existence, nature and extent of the defect 
and temporary injury to the property, as well as the measure of damages, are 
matters for the trier of fact.

[¶19]   Our understanding of the nature of 
the warranty is the same as that found in several other jurisdictions. In South 
Dakota, "The builder is not required to construct a perfect house and in 
determining whether a house is defective the test is reasonableness and not 
perfection." Waggoner v. Midwestern Development, Inc., 83 S.D. 57, 154 N.W.2d 803, 809 (1967); accord Jeanguneat v. Jackie Hames Construction Company, 576 P.2d 761, 764 (Okla. 1978)2. Echoing this standard is Nastri v. 
Wood Bros. Homes, Inc., 142 Ariz. 439, 690 P.2d 158, 163 (1984): "Arizona does 
not adhere to the narrow standard * * * that the defect be such that it will not 
keep out the elements or that it is not a safe place to live." As the court 
aptly stated, "it would be the height of cynicism to allow a shoddy builder to 
escape liability because his work was not shoddy enough." Id. 690 P.2d  at 163. 
Consistent with the Arizona decision, Illinois holds that "[t]he mere fact that 
the house is capable of being inhabited does not satisfy the implied warranty." 
Petersen v. Hubschman Construction Co. Inc., 76 Ill. 2d 31, 27 Ill.Dec. 746, 389 N.E.2d 1154, 1158 (1979). Rejecting the same narrow test urged here by the 
builder-vendor, the Illinois Supreme Court remarked:

The use of the term 
"habitability" is perhaps unfortunate. Because of its imprecise meaning it is 
susceptible of misconstruction. It would more accurately convey the meaning of 
the warranty as used in this context if it were to be phrased in language 
similar to that used in the Uniform Commercial Code, warranty of 
merchantability, or warranty of fitness for a particular purpose.

Id. 27 Ill.Dec. 
at 750, 389 N.E.2d  at 1158.

We agree. In 
this vein we also agree with the suggestion in Comment, Washington's New Home 
Implied Warranty of Habitability - Explanation and Model Statute, 54 Wn.L.Rev. 
185, 211-12 (1978):

     A solution to the 
problems created by the structural and habitability limitations is provided by 
characterizing the warranty as one of merchantability rather than one of 
habitability. Using the Uniform Commercial Code by analogy, the builder-vendor 
would guarantee that, upon sale, the house would be of fair average quality, 
that it would pass without objection in the building trade, and that it would be 
fit for the ordinary purpose of living in it.

     This warranty would 
suit the expectations and needs of both parties. * * * Some courts have already 
moved in this direction. [Pollard v. Saxe & Yolles Development Co., 12 Cal. 3d 374, 115 Cal. Rptr. 648, 525 P.2d 88 (1974); Wright v. Creative Corp., 30 
Colo. App. 575, 498 P.2d 1179 (1972); Gable v. Silver, 258 So. 2d 11 (Fla. Dist. 
Ct. App. 1972); Smith v. Old Warson Dev. Co., 479 S.W.2d 795 (Mo. 1972); 
Schipper v. Levitt & Sons, 44 N.J. 70, 207 A.2d 314 (1965); Yepsen v. 
Burgess, 269 Or. 635, 525 P.2d 1019 (1974); Rothberg v. Olenik, 128 Vt. [295] 
306, 262 A.2d 461 (1970)].

Viewed in this 
light, the implied warranty of habitability protects the buyer's legitimate 
expectation that the house is reasonably suited for its intended 
use.

[¶20]   Applying this construction of the 
implied warranty to the facts of this case, and drawing all reasonable 
inferences from those facts in a light most favorable to the homeowners, we find 
no reason to reverse the judgment entered by the trial court. Although the trial 
court accepted and based its decision on a standard whether a reasonable 
homeowner faced with such a defect would be warranted in concluding that a major 
impediment to habitation existed, Banville v. Huckins, 407 A.2d 294, 297 (Me. 
1979), we follow the appellate rule that this court must affirm the trial court 
action on appeal if the judgment is sustainable on any legal ground appearing in 
the record. Kane v. Kane, 706 P.2d 676 (Wyo. 1985).

[¶21]   Relying on the ample evidence 
favorable to the homeowners, the trial court as the finder of fact was justified 
in finding that: a musty odor emanated from the basements of the townhouses; 
white rings on the concrete basement floors evidenced the residue of dried water 
spots; excessive humidity existed in both basements; and the homeowners were 
reasonably justified in being reluctant to finish the basements as living areas, 
such as a bedroom, unless the excessive humidity problems were corrected. The 
trial court was correct in concluding upon these facts that the builder-vendor 
had breached the implied warranty of workmanship and fitness for habitation as 
we have described it both in past decisions and here.

·         
Failure to Mitigate 
Personal Property Damages

[¶22]   Next, we address the 
builder-vendor's assertion that the evidence showed the Jays failed to mitigate 
their personal property damages, for which the trial court awarded them 
$765.

[¶23]   When the Jays moved into their 
townhome, they stored a variety of personal property in their basement, 
including musical instruments encased in carrying cases, clothes bags and 
children's toys. As a result of the dampness and excessive humidity in the 
basement, these personal property items became moldy over time, and the musical 
instruments developed rust. Although Mr. Jay detected the dampness in the 
basement when he first moved into the townhome and although he stored the 
personal property items in that basement in light of that knowledge, he 
testified that the builder-vendor led him to believe no problem existed. He 
further testified that he tried to eliminate the dampness and excessive humidity 
by running fans and a dehumidifier, and by opening ventilation 
units.

[¶24]   In Anderson, this court explained 
the homeowner's duty to mitigate damages as being that once an injury occurs, 
the homeowner must take reasonable measures to protect property so that 
additional damage would not occur unnecessarily. Id. 681 P.2d  at 1324. The trial 
court heard Mr. Jay's testimony under both direct and cross-examination. Relying 
on the evidence most favorable to Mr. Jay on this issue, the trial court could 
reasonably conclude that he discharged his mitigation duty. We find no 
error.

2. 
HOMEOWNERS' CROSS-APPEAL

[¶25]   Turning to the homeowners' 
cross-appeal contention that the trial court's damages awards were inadequate, 
we apply this court's standard relating to the sufficiency of the evidence. 
Gasaway v. Reiter, 736 P.2d 749, 752 (Wyo. 1987). The trial court received the 
evidence from the parties' lay and expert witnesses. As to be expected, the 
evidence concerning the cause of the dampness and excessive humidity problems, 
as well as the appropriate remedy and the costs of the remedy, was in conflict. 
Sorting through that conflicting evidence, the trial court concluded that a 
perched water table in the ground under the basement was, more likely than not, 
the source of moisture from which capillary action was fed, leading to excessive 
humidity and dampness in the basement. The trial court next concluded that the 
builder-vendor's evidence on the appropriate remedy of installing a capillary 
break and on the cost of that remedy was reasonable under all the circumstances. 
We find the evidence sufficient and shall not disturb the trial court's 
judgment.

[¶26]   Affirmed in all 
respects.

THOMAS, J., 
dissents.

THOMAS, Justice, 
dissenting.

[¶27]   I must dissent from the disposition 
of this case. The majority, almost expressly, invokes the strict liability 
theories of the Uniform Commercial Code, §§ 34-21-101 to -1002, W.S. 1977, and 
applies those remedies to real property. The definition of goods in the Uniform 
Commercial Code obviously excludes realty. Section 34-21-205, W.S. 1977. 
Nevertheless, citing authority that uses the Uniform Commercial Code as a point 
of reference, the majority adopts the implied warranty of fitness for a 
particular purpose, as found in Section 34-21-232, W.S. 1977, even though the 
authority relied upon does not go beyond the implied warranty of merchantability 
found in Section 34-21-231, W.S. 1977. This interjection is demonstrated by the 
focus in the majority opinion upon the inability to finish the basements as 
living areas.

[¶28]   The result in this case goes far 
beyond the warranty of habitability as it has been adopted in this jurisdiction 
in Moxley v. Laramie Builders, Inc., 600 P.2d 733 (Wyo. 1979), and Tavares v. 
Horstman, 542 P.2d 1275 (Wyo. 1975). Liability is imposed upon the 
builder-vendor even though that firm was found not to have been negligent. 
Liability in the absence of negligence, by definition, is strict 
liability.

[¶29]   The difficulty I have with this 
resolution is that it does make the builder-vendor an insurer of the 
construction of the house. Given this potential for strict liability, the 
builder-vendor, not because of negligence and not because of contract, since 
normally the home will have been accepted by the purchaser, will be forced to 
attend to, and repair, even the most minute defects. It will be uniformly less 
expensive to do that than to attempt to defend a lawsuit in order to demonstrate 
that the defect would not come within these new theories. The net effect, of 
course, is to enhance the cost of residences. I perceive that to be unfortunate 
during a period in the economic history of this nation in which it is becoming 
more and more difficult for young parents to finance the purchase of homes in 
which to raise their families.

[¶30]   In my opinion, the remedies 
developed in our prior cases are adequate to prevent overreaching on the part of 
the builder-vendor, and it is unnecessary to expand his liability to this 
degree. I would reverse the judgment because it was premised upon an erroneous 
rule of law.

FOOTNOTES

1 Pursuant to stipulation 
by the parties, an order dated September 14, 1988, dismissed with prejudice the 
defendant Betty Tuttle, who had formed the Patio Partnership with Gordon 
Deisch/Regency Construction Company, Inc.

2 Annotation, Liability of 
Builder-Vendor or Other Vendor of New Dwelling for Loss, Injury, or Damage 
Occasioned by Defective Condition Thereof, 25 A.L.R.3d 383, 483 (1969), and 
cases cited therein.