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Terlinde v. Neely

Supreme Court of South Carolina
Oct 28, 1980
271 S.E.2d 768 (S.C. 1980)

Summary

holding that a contract between a homebuilder and homeowner extended to future home purchasers because, by placing his product into the stream of commerce, the builder owed a duty of care to the product's users

Summary of this case from McPherson v. CSX Transp., Inc.

Opinion

21319

October 28, 1980.

S. Jackson Kimball, Roddey, Carpenter White, Rock Hill, for appellants. John M. Spratt, Jr., York, and Robert M. Ward, Rock Hill, for respondents.


October 28, 1980.


This action seeks damages for the alleged defective construction of a house. The complaint contains two causes of action, one for breach of implied warranty that the house was "merchantable," and suitable and fit for its intended purpose, and the other for negligence, recklessness, and wilfulness in the construction of the house by respondents. The matter is here on appeal by the appellants-purchasers from an order by the trial court granting summary judgment in favor of the respondents-builders. The material facts are not in dispute and are taken from the Statement of the case.

The house in question was constructed by respondents and completed in September 1972. It is located in a subdivision owned and developed by respondents and was built for "speculative" sale, i.e., not pursuant to any contract with a purchaser. In April 1973, respondents sold the house to Kenneth M. and Kathleen S. Johnson. In March 1976, the house evidenced substantial settlement, and respondents, upon being advised of the condition, paid to the Johnsons the sum of $230.18, receiving in return a "Receipt and Release." The Johnsons undertook to remedy some of the damage caused by the settlement of the house.

Thereafter, on July 23, 1976, appellants purchased the house from the Johnsons. Within a short period of time after the purchase by appellants, the house evidenced additional substantial settlement of its foundation. Cracks began to appear in the sheetrock walls of the house; the floor began to sink away from the interior walls; doors would not close properly; the brick veneer on the exterior of the house began to crack and separate at the mortar joints; and, upon closer inspection, pillars underneath the house were sinking away from the supporting beams of the floor. An inspection and evaluation by qualified experts indicates that the footings of the house were built on "fill dirt". Estimates to repair the existing damage and remedy all of the cause of the settlement ranged from $5,916.00 to $22,978.73.

The answer of respondents acknowledged that they constructed the house, that they had been advised by the Johnsons (the original purchasers) of the settlement of the house, that they had paid the sum of money to the Johnsons to correct the damage, and received a release for such payment. Summary judgment on the cause of action for breach of implied warranty was sought on the ground that there was no privity of contract between appellants (the second owners of the house) and respondents, in that respondents made no representations or warranties, either express or implied, to appellants. Summary judgment on the action for negligence was sought on the ground that appellants sustained no personal injuries and alleged no negligent or reckless damage to the house by respondents since appellants acquired title to it. It was also asserted, with reference to the cause of action for negligence, that there was no privity of contract between appellants and respondents and that the house is not an inherently dangerous product.

The trial judge, after meticulously analyzing our case law, concluded the reasons expressed in Rutledge v. Dodenhoff, 254 S.C. 407, 175 S.E.2d 792, and Lane v. Trenholm Building Company, 267 S.C. 497, 229 S.E.2d 728, for holding a builder to an implied warranty for a new house do not exist since the home, in this case, is about three years old. Hence, he held the plaintiffs-appellants had no privity to pursue an action in contract. We disagree that the consideration of these cases requires a dismissal and that privity is required.

The central issue in this case is whether or not a subsequent purchaser of a house may pursue a cause of action in contract or tort against a home builder for a reasonable period after the dwelling's construction. We follow the import and holdings of our previous decisions and the precedents of other jurisdictions to deny the respondent-builder's motion for summary judgment and allow the case to proceed to a trial on the merits.

The extension of implied warranties to subsequent purchasers is based upon sound legal and policy considerations. Respondents constructed the dwelling and, as the builder, held out their expertise to prospective buyers. Common experience teaches that latent defects in a house will not manifest themselves for a considerable period of time, likely as alleged in this case, after the original purchaser has sold the property to a subsequent unsuspecting buyer. Furthermore, the character of society has changed such that the ordinary buyer is not in a position to discover hidden defects in a structure, especially at a time when he is provided more elaborate furnishings which tend to obscure the structural integrity of the facility. The fact that the subsequent purchaser did not know the home builder, as did the original purchaser, does not negate the reality of the "holding out" of the builder's expertise and reliance which occurs in the market place. We recognized this concept in Lane, supra, by implying a warranty even though the buyer did not know the actual builder and consequently did not rely on his skill.

We also disagree with the conclusion of the trial judge that an equal bargaining position existed between the buyer and the builder because three years was sufficient time for latent defects to come to light. The length of time for latent defects to surface, so as to place subsequent purchasers on equal footing should be controlled by the standard of reasonableness and not an arbitrary time limit created by the Court.

The aforementioned policy considerations aside, the literal holdings of our precedents require reversal of the trial judge on the question of privity. In Lane, supra, we held that when a "new building is sold, there is an implied warranty of fitness for its intended use which springs from the sale itself." Recently, we overruled a privity objection and allowed a suit by a subsequent purchaser of a warehouse against a manufacturer of materials used in its construction. See JKT Company, Inc. v. Hardwick et al., S.C. 265 S.E.2d 510 1980. In so ruling, we indicated the concept of privity is no longer viable in this jurisdiction. The only logical application of these principles requires a holding that an implied warranty for latent defects extends to subsequent home purchasers for a reasonable amount of time.

The lower court additionally held that the plaintiffs had no remedy in tort. We disagree.

We have previously allowed the imposition of tort liability to a third party as a result of contractual obligations despite the absence of privity between the tortfeasor and the third party. See Edward's of Byrnes Downs v. Charleston Sheet Metal Company, 253 S.C. 537, 172 S.E.2d 120. The key inquiry is foreseeability, not privity. In our mobile society, it is clearly foreseeable that more than the original purchaser will seek to enjoy the fruits of the builder's efforts. The plaintiffs, being a member of the class for which the home was constructed, are entitled to a duty of care in construction commensurate with industry standards. In the light of the fact that the home was constructed as speculative, the home builder cannot reasonably argue he envisioned anything but a class of purchasers. By placing this product into the stream of commerce, the builder owes a duty of care to those who will use his product, so as to render him accountable for negligent workmanship.

As we said in Lane, supra, our objective is to protect the innocent purchaser from latent defects. The reasoning, which would arbitrarily interpose a first buyer as an obstruction to someone equally as deserving, is incomprehensible. See Moxley v. Laramie Builders, Inc., Wyo., 600 P.2d 733; Brown v. Fowler, S.D., 279 N.W.2d 907; Barnes v. Mac Brown and Company, Inc., Ind., 342 N.E.2d 619.

Judgment is accordingly reversed and the case remanded for trial.

LITTLEJOHN, NESS, GREGORY and HARWFLL, JJ., concur.


Summaries of

Terlinde v. Neely

Supreme Court of South Carolina
Oct 28, 1980
271 S.E.2d 768 (S.C. 1980)

holding that a contract between a homebuilder and homeowner extended to future home purchasers because, by placing his product into the stream of commerce, the builder owed a duty of care to the product's users

Summary of this case from McPherson v. CSX Transp., Inc.

holding that “[t]he only logical application” of the principles underlying the implied warranty of workmanship requires a holding that it “extends to subsequent home purchasers for a reasonable amount of time”

Summary of this case from Long Trail House Condo. Ass'n v. Engelberth Constr., Inc.

holding that a subsequent purchaser of a home may pursue a cause of action in contract or tort against a developer

Summary of this case from Sapp v. Ford Motor Co.

holding that a contract between a homebuilder and homeowner extended to future home purchasers because, by placing his product into the stream of commerce, the builder owed a duty of care to the product's users

Summary of this case from McCullough v. Goodrich

holding that the "length of time for latent defects to surface . . . should be controlled by the standard of reasonableness"

Summary of this case from Dunelawn Owners' Ass'n v. Gendreau

holding that because the home was built for "speculative" sale, "the home builder [could not] reasonably argue he envisioned anything but a class of purchasers" and the plaintiffs, as members of that class, were "entitled to a duty of care in construction commensurate with industry standards"

Summary of this case from Holley v. Dan-Sa, Inc.

In Terlinde, a subsequent home buyer brought a negligence claim against the builder of the house, which was built for speculative sale. 271 S.E.2d at 768.

Summary of this case from Ross Dress for Less, Inc. v. Lauth Constr. Grp., LLC

In Terlinde, which addressed the duty of a homebuilder to future homeowners, the Court articulated several public policy considerations upon which it's [sic] opinion was based; specifically, that the ordinary buyer was not in a position to discover latent defects in a structure, and that the lapse of time before which latent defects manifest themselves created unequal bargaining positions between the subsequent purchaser and the builder.

Summary of this case from Ross Dress for Less, Inc. v. Lauth Constr. Grp., LLC

settling house

Summary of this case from City of Greenville v. W.R. Grace Company

stating that “[t]he length of time for latent defects to surface ... should be controlled by the standard of reasonableness”

Summary of this case from Long Trail House Condo. Ass'n v. Engelberth Constr., Inc.

In Terlinde, which addressed the duty of a homebuilder to future homeowners, the Court articulated several public policy considerations upon which it's opinion was based; specifically, that the ordinary buyer was not in a position to discover latent defects in a structure, and that the lapse of time before which latent defects manifest themselves created unequal bargaining positions between the subsequent purchaser and the builder.

Summary of this case from McCullough v. Goodrich

stating that "length of time for latent defects to surface . . . should be controlled by the standard of reasonableness"

Summary of this case from Heath v. Palmer

stating that subsequent owners are members of class for whom home was constructed, that they are entitled to duty of care in construction, and that key inquiry is foreseeability

Summary of this case from Moglia v. McNeil

stating that the "key inquiry" in determining whether to impose liability is "foreseeability, not privity"

Summary of this case from Dorrell v. South Carolina Dept. of Transp

ill-fitting doors, cracking

Summary of this case from Lempke v. Dagenais

In Terlinde v. Neely, 275 S.C. 395, 271 S.E.2d 768 (1980), our most recent case involving implied warranties, we held lack of privity does not bar a remote purchaser from suing an initial vendor on an implied warranty theory.

Summary of this case from Arvai v. Shaw

In Terlinde v. Neely, 275 S.C. 395, 271 S.E.2d 768, 10 A.L.R. 4th 379 (1980), a case involving a speculative house, our Supreme Court held that an implied warranty for latent defects extends to subsequent purchasers for a reasonable period of time.

Summary of this case from Arvai v. Shaw
Case details for

Terlinde v. Neely

Case Details

Full title:William R. TERLINDE and Nancy A. Terlinde, Appellants, v. J.F. NEELY, Sr.…

Court:Supreme Court of South Carolina

Date published: Oct 28, 1980

Citations

271 S.E.2d 768 (S.C. 1980)
271 S.E.2d 768

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