Title: Heath v. PalmerÂ

State: vermont

Issuer: Vermont Supreme Court

Document:

Heath v. Palmer (2005-142)

2006 VT 125

[Filed 20-Nov-2006]

                                 ENTRY ORDER

                                 2006 VT 125

                      SUPREME COURT DOCKET NO. 2005-142

                             FEBRUARY TERM, 2006


  Joanne and Jerry Heath               }         APPEALED FROM:
                                       }
       v.                              }         Chittenden Superior Court
                                       }  
  Warren C. Palmer, Saxon Oaks         }
  Company, WCP Construction            }         DOCKET NO. S1301-02 CnC
  Company, and Palmer Real Estate      }
  and Development Company              ]
                                                 Trial Judge: Richard W. Norton

             In the above-entitled cause, the Clerk will enter:

       ¶  1.  Plaintiffs Joanne and Jerry Heath filed a three-count
  complaint against defendant Warren Palmer and several corporate entities
  owned by Palmer (defendants) alleging consumer fraud, contractor's
  negligence, and breach of contract and warranty in the construction and
  sale of a new home located in the Town of Jericho.  The court rejected
  plaintiffs' negligence and fraud claims but entered judgment for plaintiffs
  on their warranty claim and awarded damages of $4,089.74.  Plaintiffs
  appeal, contending that the court erred by: (1) limiting defendants'
  liability to construction defects reported within one year of the closing;
  (2) awarding lower damages for certain defects than the evidence warranted;
  (3) rejecting plaintiffs' consumer fraud and negligence claims; (4)
  refusing to hold defendant Palmer individually liable; and (5) denying
  plaintiffs' request for prejudgment interest.  As explained below, we
  affirm the court's rulings in most respects, but reverse and remand for
  further findings and conclusions with regard to the award for breach of
  warranty. 

       ¶  2.  The facts may be summarized as follows. Plaintiffs entered
  into a "buy-build" contract with defendants for the construction and
  purchase of a new home. The total price of the home was $261,302. The
  closing occurred in October 1999.  Plaintiffs received a copy of
  defendants' "Service Repair and Warranty Policy" at the closing.  The
  policy called for plaintiffs to inspect the property thirty days, ninety
  days, and twelve months after the closing, to complete and return
  inspection reports, and to provide access for defendants to conduct service
  calls in response to the inspection reports.  The policy represented that
  defendants offered "quality construction with exceptional value" and set
  forth a "limited warranty on the construction of every home we build" with
  the exception of components such as furnace, cabinets, and light fixtures
  that were covered by their own manufacturers' warranties. 

       ¶  3.  Plaintiffs submitted a thirty-day inspection report on a form
  provided by defendants detailing a number of alleged construction defects
  throughout the house.  Plaintiffs created and submitted their own checklist
  for the ninety-day and twelve-month inspections setting forth an extensive
  list of additional defects.  Plaintiffs sent an additional defects list in
  June 2002, followed by a detailed structural engineering report listing the
  alleged defects room-by-room with cost estimates for each item of repair. 
  The total exceeded $30,000.  
   
       ¶  4.  Dissatisfied with defendants' response, plaintiffs filed
  suit, alleging construction negligence, consumer fraud, and breach of
  contract and warranty.  The parties agreed to submit the matter to a
  special master, but reserved the right to object to the court's acceptance
  of the report.  V.R.C.P. 53.  Following a hearing, the master submitted a
  written report to the court, setting forth his findings and conclusions. 
  The master concluded that the warranty was "an effective limitation of
  liability" precluding plaintiffs from recovering for any defects not
  reported within one year of the closing or otherwise acknowledged as
  deficiencies by defendants.  As for recoverable damages, the master noted
  that the only evidence of remedial costs was the engineering report
  submitted by plaintiffs, and awarded damages for nine separate repair items
  totaling $4.089.74.  The master explained the discrepancy between this
  figure and that submitted by plaintiffs as follows: 

    Some of [plaintiffs'] claims are denied because notice was not
    given during the Warranty period; some are denied because,
    although Plaintiffs are not satisfied with the result, the work
    complie[d] with contract specifications (e.g. the driveway), is
    not negligent (e.g.  basement water) or of an unworkmanlike
    quality (e.g. garage wall); and some are denied because they are
    covered by a manufacturer's warranty (e.g. laminate floor), and
    are therefore excluded by the Warranty. 


       ¶  5.  Plaintiffs objected to the master's report on several grounds,
  but the trial court rejected plaintiffs' objections and issued a written
  decision adopting the report in its entirety.  As noted, the policy
  provided generally that the builder "[stood] behind the construction of
  each and every home" and sought "to provide quality assurance" and
  represented that the builder offered "quality construction" and a "limited
  warranty on the construction of every home we build."  The court concluded
  that the policy was not "an express assurance of any particular level of
  quality," but rather "a memorialization of the implied warranty of good
  workmanship" stating a process and schedule for reporting discovered
  defects to be repaired. (FN1)  The court observed, correctly, that the
  implied warranty applied to defects latent at closing.   Meadowbrook Condo.
  Ass'n v. S. Burlington Realty Corp., 152 Vt. 16, 19, 565 A.2d 238, 240
  (1989) (noting that "the law will recognize an implied warranty only with
  respect to defects that were latent at the time of purchase").   The court
  further concluded, in agreement with the master, that the policy limited
  defendants' liability for all latent defects to those defects reported
  within one year of the closing.  The court affirmed the master's damage
  award for breach of warranty, rejected plaintiffs' negligence and consumer
  fraud claims, declined to hold defendant Palmer personally liable, and
  denied plaintiff's request for prejudgment interest.  This appeal followed.   
     
                                   I.

        
       ¶  6.  Plaintiffs first contend that the court erred in construing
  the warranty policy to limit defendants' liability to defects reported
  within one year of the closing.  The general rule is that exclusions or
  modifications of warranties must be conspicuous and unambiguous.   See 9A
  V.S.A. § 2-316(2) (exclusions or modifications of implied warranty of
  merchantability and fitness in sale of goods must be conspicuous and in
  writing); Bolkum v. Staab, 133 Vt. 467, 469-70,