Gupta v. Ritter Homes, Inc.

This is an appeal from a summary judgment for Ritter Homes, Inc., et al (Ritter) in a suit by the second owner of a residence. The owner, Vijai P. Gupta (Gupta), sued Ritter as the builder of his home, on three theories: (1) implied warranty under the Deceptive Trade Practices Act, Tex.Bus. & Com.Code Ann. Ch. 17 (DTPA); (2) implied warranty under the Uniform Commercial Code, Tex.Bus. & Com.Code Ann. § 2.102 (U.C.C.); and (3) negligent construction. The trial court rendered summary judgment for Ritter on all three theories. The court of appeals sustained the summary judgment on the theory of implied warranty under the DTPA by holding that no implied warranty arises from the sale of a used house. 633 S.W.2d 626. The court of appeals also sustained the trial court’s denial of a cause of action under the U.C.C. by holding that the U.C.C. excludes sales of realty, but reversed and remanded the cause for trial on Gupta’s negligent construction theory. The court of appeals’ remand is not contested by Ritter and Gupta does not complain of the court of appeals’ ruling on an implied warranty under the U.C.C. The question of an implied warranty under the DTPA is the only issue before us. We affirm that part of the court of appeals’ judgment which remanded the cause for trial on the theory of negligent construction and which sustained the judgment of the trial court on the theory of implied warranty under the U.C.C. We reverse and remand that part of the judgment of the court of appeals which held that there is no implied warranty by a builder under the DTPA.

On November 3, 1976, Ritter purchased the lot upon which the house was built and on July 27, 1977, sold the lot and finished house to James E. Wobig. Mr. Wobig and his family occupied the house for approximately three months and then sold it to Gupta. Gupta alleged that the slab foundation of the house had settled excessively causing the walls to crack, the roof to leak and the patio to pull away from the rest of the house. He also alleged that the garage slab and the driveway had cracked.

This Court held in Humber v. Morton, 426 S.W.2d 554 (Tex.1968), that a builder/vendor impliedly warrants to his purchaser that a building constructed for residential use has been constructed in a workmanlike manner and is fit for habitation, thus rejecting the doctrine of caveat emptor. The question before us is whether that implied warranty extends to subsequent purchasers. We hold that it does cover latent defects not discoverable by a reasonably prudent inspection of the building at the time of sale. The reasons for this holding are: (1) a builder should be in business to construct buildings free of latent defects; (2) the buyer cannot, by reasonable inspection or examination, discern such defects; (3) the buyer cannot normally rely on his own judgment in such matters; (4) in view of the circumstances and the relations of the parties, the buyer is deemed to have relied on the builder; and (5) the builder is the only one who has or could have had knowledge of the manner in which the building was built. As between the builder and owner, it matters not whether there has been an intervening owner. The effect of the latent defect on the subsequent owner is just as great as on the original buyer and the builder is no more able to justify his improper work as to a subsequent owner than to the original buyer. The public policy upon which the Humber decision was based applies equally to both situations. See id. at 552.

Ritter contends that an implied warranty arising out of a contract must fail as to a subsequent purchaser for lack of privity. We hold that the implied warranty of habitability and good workmanship is implicit in the contract between the builder/vendor and original purchaser and is automatically assigned to the subsequent purchaser. This interpretation of an implied warranty as a contract remedy is consistent with our holding in Humber and our recent holding in G.W.L. v. Robichaux, 25 Sup.Ct.J. 166 (January 8, 1983), where we discussed the implied warranty of habitability explicitly in terms of contract law and held that it, like any other provision, could be waived.

Ritter cites Cheney v. Parks, 605 S.W.2d 640 (Tex.Civ.App.—Houston [1st Dist.] 1980, writ ref'd n.r.e.) and its progeny Thornton Homes, Inc. v. Greiner, 619 S.W.2d 8 (Tex.Civ.App.—Eastland 1981, writ ref’d n.r.e.) as holding that no implied warranty exists in the sale of a used house. Cheney was a suit by the purchaser of a 16 year old house against a prior owner who was not the builder. We approve the holding in Cheney to the extent it stands for the proposition that the sale of a used house by a non-builder owner does not imply a warranty of habitability on the part of the non-builder owner. The fact that the home is “used” does not in and of itself limit the liability of a builder.

Thornton Homes involved a suit by subsequent purchasers against a builder/vendor. The court of appeals held that the purchasers were barred from bringing a claim for breach of the implied warranty of habitability against the builder because the home was “used.” Id. at 9. For the reasons set out above, we disapprove Thornton.

We affirm that portion of the court of appeals’ judgment which remanded this cause for trial on the issue of negligent construction and sustained the trial court’s judgment on the theory of an implied warranty under the U.C.C. We reverse and remand for trial that portion of the court of appeals’ judgment affirming the trial court’s holding that no cause of action existed under the DTPA on an implied warranty of habitability.

SPEARS, J., concurring in which RAY, J., joins.