August 22, 2012
A Defective New House

by Justice Paul E. Pfeifer

Back in 2004, Paul Jones and Latosha Sanders bought a new house from Centex Homes. Moving into a new home is exciting, but if the house has defects it can diminish your enthusiasm. Paul and Latosha quickly discovered that their computers, cordless telephones, and televisions did not operate properly in their new house.

After some investigation, they concluded that the metal joists in the house were magnetized, which interfered with the electronics. Their efforts to resolve the problem came to naught.

Eventually, Paul and Latosha filed suit against Centex Homes, alleging various causes of action, including breach of contract, breach of express and implied warranties, negligence, and failure to perform in a workmanlike manner.

In response, Centex filed a motion for summary judgment, meaning the company asked the judge to rule on the case without a trial. Centex argued that Paul and Latosha had waived all warranties, whether express or implied, except the specific limited warranty that Centex Homes provides in the sales agreement.

The trial court agreed with Centex and granted the motion for summary judgment. When the case came before the court of appeals, it affirmed the trial court’s judgment, stating: “We find no error with the trial court’s determination that both the sale agreement and the limited warranty adequately explained ... that the Limited Home Warranty covers all defects in material and workmanship and that there are no other warranties either expressed or implied.”

After the court of appeals ruling, the case came before us – the Supreme Court of Ohio – for a final review.

In Ohio, the duty to construct a new house in a workmanlike manner has been imposed by law on all homebuilders since at least 1966. That year, our court issued an opinion in a case called Mitchem v. Johnson. In Mitchem, home buyers sought compensation for water damage resulting from the fact that their houses had been built in a low portion of a lot with surface-water problems and without a foundation drainage system.

There was no warranty that covered the defect, but we concluded that the home buyers were entitled to recover damages if they could establish that the homebuilder had not constructed the house in a workmanlike manner.

In that case, our court wrote that a duty is imposed by law upon a homebuilder to construct a house “in a workmanlike manner and to employ such care and skill in the choice of materials and work as will be commensurate with the gravity of the risk involved in protecting the structure against faults and hazards, including those inherent in its site.” If the violation of that duty causes a defect that’s hidden from revelation by an inspection reasonably available to the buyer, the homebuilder is answerable to the buyer for the resulting damages.

In determining that a duty to construct a house in a workmanlike manner exists, the 1966 court plowed the wide fertile plain between two extreme concepts: “caveat emptor” and “strict liability.”

Caveat emptor is the age-old Latin warning, “Let the buyer beware.” Under that concept, the buyer could not recover from the seller for defects to the property. Strict liability, on the other hand, places the responsibility for defects squarely on the shoulders of the homebuilder.

Without saying it in so many words, the 1966 court apparently determined that it would be unfair for it to apply either of these standards – caveat emptor or strict liability.

Then, in a case from 1980, our court stated that the duty of the builder-vendor to build a house in a workmanlike manner “is a duty arising out of the contract of sale and not out of a general duty owed to the public at large.”

The 1980 court also held that the duty to construct a house in a workmanlike manner did not extend to subsequent buyers of the house. But just three years later, the court overruled that case, stating, “No sound policy reasons exist to prevent the extension of this duty to all subsequent” buyers as well.

These cases led us to conclude that in Ohio, a duty to construct a house in a workmanlike manner using ordinary care is imposed by law on all homebuilders. The question before us in Paul and Latosha’s case was whether a home buyer can waive his right to enforce a homebuilder’s legal duty to construct a house in a workmanlike manner.

Everyone agrees that the purchase contracts that Paul and Latosha signed contain provisions that waive all implied warranties. In place of whatever implied warranties might otherwise be in effect, Centex offered a detailed limited warranty.

At oral arguments before our court, Centex repeatedly referred to the requirement that a homebuilder construct a house in a workmanlike manner as an “implied warranty,” while Paul and Latosha called it a “duty.” Who was right?  Based on the cases that were mentioned earlier, it’s clear that our court has concluded that the requirement is not an implied warranty, but instead is a duty imposed by law.

So, did Paul and Latasha waive their right to enforce this duty when they signed the contract with Centex? Using those earlier cases as a guide, we concluded that the duty to construct a house in a workmanlike manner using ordinary care is the baseline standard that Ohio home buyers can expect builders to meet.

This duty does not require builders to be perfect, but it does establish a standard of care below which builders may not fall without being subject to liability, even if a contract with the home buyer purports to relieve the builder of that duty.

By a seven-to-zero vote we concluded that a homebuilder’s duty to construct a house in a workmanlike manner using ordinary care is a duty imposed by law, and a home buyer’s right to enforce that duty cannot be waived. We thus reversed the court of appeals and sent the case back for a trial on the claims that Centex breached its duty to construct the home in a workmanlike manner.

EDITOR'S NOTE: The case referred to is Jones v. Centex Homes, 132 Ohio St.3d 1, 2012-Ohio-1001. Case No. 2010-1826. Decided March 14, 2012. Majority opinion written by Justice Paul E. Pfeifer.