Court Recognizes Implied Warranty of Habitability / Workmanlike Construction in Certain Residential Construction

Hartley v. Ballou, 286 N.C. 51, 209 S.E.2d 776 (1974)

The plaintiff purchased a house from the defendants which one of the defendants had built.  Shortly after the purchase, the plaintiff experienced flooding in the basement of the house.  The plaintiff sued the defendants for breach of express and implied warranties.  Following trial, the trial court entered a judgment in favor of the plaintiff against the builder defendant.  On appeal, the North Carolina Supreme Court recognized an implied warranty of habitability and workmanlike construction by the builder-vendor of a residence to the initial vendee.  The Supreme Court ultimately reduced the damages awarded since it found that they exceeded the builder’s liability under the implied warranty.

Wilkings L. Hartley purchased a house which had been constructed by George L. Ballou, one of the defendants, and had been sold to Hartley by Mr. Ballou and his wife.  Shortly after the purchase of the house, Hartley began to experience substantial and repeated flooding in the house’s basement.  After the initial flooding, Ballou made certain repairs to the basement at an approximate cost of $4,000.  The basement remained dry for the next eighteen months, but sustained additional flooding following several hurricanes in the area.  Following the second flooding event, Hartley brought suit against Ballou, alleging breach of express and implied warranties relating to the basement flooding.  In particular, Hartley alleged Ballou warranted, expressly and impliedly, that the house was insulated, that the house’s walls were adequately waterproofed, and that the cement floor of the basement was properly constructed so as to prevent water intrusion.  Hartley further alleged that the express and implied warranties were made knowingly, intentionally, and fraudulently to induce him to purchase the house.  The trial court entered a judgment in favor of Hartley, holding that Ballou breached an implied warranty to Hartley that the house was properly constructed and suitable for its intended use as a residence. Ballou appealed.

As an initial matter, the Supreme Court noted that Hartley’s allegations did not support a claim for express warranty.  There was no evidence, the court stated, that Ballou expressly warranted that the house was insulated, that the house’s walls had been adequately waterproofed, that the floor in the basement was properly constructed so as to prevent moisture intrusion, or that any warranty was made knowingly, intentionally, and fraudulently to induce Hartley to purchase the home.  Consequently, if Hartley was entitled to recover, his recovery must be based on breach of implied warranty.

Ballou argued that the defense of caveat emptor should bar Hartley’s implied warranty claim.  The court chose to relax this rule, and held that a builder has an implied duty to perform his work in a proper and workmanlike manner.  The court defined this implied duty as follows:

[W]e hold that in every contract for the sale of a recently completed dwelling, and in every contract for the sale of a dwelling then under construction, the vendor, if he be in the business of building such dwellings, shall be held to impliedly warrant to the initial vendee that, at the time of the passing of the deed or the taking of possession by the initial vendee (whichever first occurs), the dwelling, together with all its fixtures, is sufficiently free from major structural defects, and is constructed in workmanlike manner, so as to meet the standard of workmanlike quality then prevailing at the time and place of construction; and that this implied warranty in the contract of sale survives the passing of the deed or the taking of possession by the initial vendee.

Accordingly, the court held Ballou impliedly warranted to Hartley that the basement of the newly constructed house had been sufficiently waterproofed pursuant to the standards of workmanlike quality prevailing in that region.  The court noted, however, that this implied warranty does not constitute an absolute guarantee against all damage.

Based upon the evidence presented, the court determined that the basement of the house as initially conveyed flooded under normal weather conditions for the area, and therefore, that Ballou breached the implied warranty for failing to sufficiently waterproof the house’s basement.  However, the court recognized that Ballou repaired the basement after the initial flooding event, and that subsequent flooding in the basement occurred during a hurricane which arose roughly eighteen months after the repairs were completed.  The court held that by extending the implied warranty to cover flooding caused by the hurricane, the trial court allowed liability and damages in excess of the scope of the implied warranty.  Consequently, the court held that Hartley was entitled to recover only for his inconvenience and expense as a result of Ballou’s breach of the implied warranty prior to the initial flooding event and related repairs, but was not entitled to damages which occurred subsequent to the completion of Ballou’s repairs.