Loch Hill Construction Co. v. Fricke

Digges, J., delivered the opinion of the Court. Having discovered through harsh experience the truth in Poor Richard’s observation that “[w]hen the well’s dry, we know the worth of water,” B. Franklin, Poor Richard’s Almanac (1746), Howard R. and Sharon L. Fricke, respondents here, instituted this action in the District Court of Maryland to recover from petitioner Loch Hill Construction Company, Inc., the cost of another well to supply their new home with water. This second well was drilled following several instances in which the first well, bored at petitioner’s ⁷¹⁰ direction to supply water to the house it constructed and sold to respondents, was not able to produce an amount adequate for the Fricke. family’s daily use. The District Court, after hearing testimony concerning the drilling and testing of the two wells, determined that there had been no breach by petitioner of its implied warranty of habitability as created by Md. Code (1974, 1978 Cum.

Supp.), § 10-203 (a) (4) of the Real Property Article, which we will later set out, and denied to the Frickes recovery for the cost of drilling the additional well. In an on the record appeal to it, the Circuit Court for Baltimore County found the District Court’s interpretation of the evidence to be clearly erroneous under Maryland Rule 1386 and entered judgment in respondents’ favor in the amount of $3763 for the cost of the second well. 1 Petitioner then sought and was granted a writ of certiorari by this Court. Although we agree with the circuit court that the factual findings upon which the District Court based its determination will not support its judgment, we think the circuit court was in error in substituting its own factual findings for those of the District Court on the question of damages and will, therefore, direct a remand of this case to the District Court for further proceedings with respect to that issue. The two wells that are the center of this controversy are both located on the same one and one-quarter acre lot in the Phoenix area of suburban Baltimore County.

The initial well was drilled in November 1975 for Loch Hill Construction Company, then the lot’s owner, by G. Edgar Harr Sons’ Corporation, which was joined in this action in the District Court as a third-party defendant. 2 After the well was drilled to a depth of 223 feet, its production capacity was tested over ⁷¹¹ a six-hour period. During that time, according to the drilling company, the well produced an average of five gallons per minute, which was more than sufficient to comply with the Baltimore County Health Department’s standard of two gallons per minute. In April of the following year, subject to the condition it be completed, the respondents purchased from petitioner for $132,500 the dwelling being constructed on the lot containing the well. Settlement under the contract of sale took place in the summer of 1976 shortly after respondents and their three teenage children moved into their newly completed home.

After the Fricke family used the well for approximately thirty days, it became dry. Though this water supply deficiency recurred on the average of once a month, Howard Fricke testified before the District Court that for the first several months he thought it simply might be the result of his family’s water usage habits. In February 1977, however, he changed his mind for one Saturday afternoon, following the use of water merely for one load of laundry, a shower, and the hosing off of a small patio in the back yard, the supply was exhausted. As a result, respondents decided to test the amount of water the well was producing and, not realizing which company had originally drilled the well, contacted G. Edgar Harr Sons’ Corporation to do the work.

This test, conducted on February 25, 1977, revealed that the well’s water recovery rate was then only four gallons in ten minutes, or four-tenths of a gallon per minute. As a result, G. Edgar Harr Sons’ Corporation suggested respondents drill a new well. When the Frickes contacted Loch Hill Construction Company about remedying the situation. Loch Hill offered to deepen the existing well.

Respondents refused this offer and instead employed G. Edgar Harr Sons’ Corporation to drill a new well. In its first attempt, a 300-foot dry hole was bored but, after beginning anew at a different location on the lot, a 200-foot well was drilled that produced a flow of six gallons per minute. This well, the Frickes say, has ended their water supply problem. When the petitioner rebuffed their attempts to obtain payment for the cost of the new well, the Frickes filed this ⁷¹² suit in the District Court.

That court determined that, under section 10-203 (a) (4) of the Real Property Article, as a condition of its sale there is an implied warranty that a new residence will have an adequate supply of potable water. It further ruled, however, that there was no breach of this warranty in this case because the original well, even though producing only four-tenths of a gallon per minute, would, when considered with the well’s storage capacity, meet the Baltimore County requirements and because the testimony presented concerning the capacity of that well, when compared with the amount of water normally needed for a family of five, showed that the supply was sufficient to render the home “fit for habitation.” In reversing this ruling, the circuit court found the District Court’s interpretation was “clearly erroneous” because, according to that court, the well did not meet Baltimore County’s minimum yield requirement. As a result, the circuit court entered a judgment against Loch Hill Construction Company for the cost of the new well, a determination the petitioner now seeks to have reversed. Although the existence of implied warranties arising from the construction and sale of new residential dwellings was first recognized by a court in this country only a little over two decades ago, Vanderschrier v. Aaron, 103 Ohio App. 340 , 140 N.E.2d 819, 821 (1957), since that time judicial acceptance of such warranties has spread rapidly until at present new home purchasers in over one-half of the states enjoy the protection of at least some type of implied warranty. 3 See Roeser, The Implied Warranty of Habitability in the Sale of New Housing: The Trend in Illinois, 1978 So.

Ill. U.L.J. 178, ⁷¹³ 178 & n. 1. Several times prior to 1970 this Court considered the status of implied warranties in the sale of new residences and determined that, absent legislative authorization, such a sale in Maryland did not incorporate any such guarantees. E.g., Neary v. Posner, 253 Md. 401, 405 , 252 A. 2d 843, 846 (1969); Allen v. Wilkinson, 250 Md. 395, 398 , 243 A. 2d 515, 517 (1968); see Worthington Constr. v. Moore, 266 Md. 19, 21-22 , 291 A. 2d 466, 467 (1972) (applying pre-1970 law).

In that year, the General Assembly enacted a new statute providing that specified implied warranties arose with the purchase of a new house. 1970 Md. Laws, ch. 151, § 1 (initially codified at Md. Code (1957,1966 Repl. Vol., 1970 Cum. Supp.), Art. 21, § 95B). The current successor to that act’s implied warranty provision is found in section 10-203 (a) of the Real Property Article and declares: (a) Warranties which are implied. — Except as provided in subsection (b) or unless excluded or modified pursuant to subsection (d), in every sale, warranties are implied that, at the time of the delivery of the deed to a completed improvement or at the time of completion of an improvement not completed when the deed is delivered, the improvement is: (1) Free from faulty materials; (2) Constructed according to sound engineering standards; (3) Constructed in a workmanlike manner; and (4) Fit for habitation. [Md. Code (1974, 1978 Cum.

Supp.), § 10-203 (a) of the Real Property Article. 4 ] ⁷¹⁴ In examining section 10-203 more closely, as we must do because it defines the scope of implied warranties in the sale of a new house, we first note that it pertains to “improvements,” which are defined in section 10-201 of the Real Property Article to include “every newly constructed private dwelling unit, and fixture and structure which is made a part of a newly constructed private dwelling unit at the time of construction by any building contractor or subcontractor.” Md. Code (1974), § 10-201 (b) of the Real Property Article. Petitioner has not contended, and correctly so in our estimation, that the dwelling involved here is not such an “improvement.” Nor do we think the statute could in any way be construed as not applying to the petitioner and the respondents here, for, by its terms, Loch Hill Construction Company, as a “person engaged in the business of erecting or otherwise creating an improvement on realty,” is a “vendor” within the meaning of section 10-201, id. § 10-201 (e), while the Frickes, as “the original purchasers] of improved realty,” are “purchaser[s]” under that section, id. § 10-201 (c). In continuing our examination of section 10-203, we find that the exceptions and exclusions provided for in subsections (b) and (d) have no relevance here. Whether a well will properly supply a new residence with water is not normally a “condition that an inspection of the premises would reveal to a reasonably diligent purchaser at the time the contract is signed” and thus would not be excepted by subsection (b) from the implied warranties of section 10-203 (a).

Id. § 10-203 (b). Neither do we find in the contract of sale evidence of any attempt by the parties under subsection (d) to exclude or modify, wholly or partially, the warranties established by section 10-203 (a). Id. § 10-203 (d). Thus, the statute’s provisions contain no impediment to a finding that petitioner, in selling this new home with its well, by implica ⁷¹⁵ tion warranted under section 10-203 (a) (4) that the premises were “fit for habitation.” In determining whether an existing condition relating to a new dwelling renders it uninhabitable under section 10-203 (a) (4), 5 the test is one of reasonableness.

See, e.g., Coney v. Stewart, 263 Ark. 148 , 562 S.W.2d 619, 621 (1978); Smith v. Old Warson Development Company, 479 S.W.2d 795, 801 (Mo. 1972); Jeanguneat v. Jackie Hames Const. Co., 576 P. 2d 761, 764 (Okla. 1978); Yepsen v. Burgess, 269 Or. 635 , 525 P. 2d 1019, 1022 (1974); Padula v. J.J.Deb-Cin Homes, Inc., 111 R.I. 29 , 298 A. 2d 529, 531 (1973); Rutledge v. Dodenhoff, 254 S.C. 407 , 175 S.E.2d 792, 795 (1970); Waggoner v. Midwestern Development, Inc., 83 S.D. 57 , 154 N.W.2d 803, 809 (1967). Accordingly, in any breach of contract action the answer to an inquiry concerning a violation of an implied warranty of habitability depends on the circumstances of the particular case. As a consequence, using the requirements of applicable governmental regulations, such as a building or housing code, together with any other evidence showing the customary or usual conditions that render habitable a new home of like kind and quality in the area where the dwelling has been constructed, if, as no doubt will frequently prove true, rational minds would disagree on the issue of fitness for habitation, the resolution of that issue rests with the trier of ⁷¹⁶ fact; otherwise, the court makes the determination as a matter of law. 6 Considering the case before us in light of this standard, we have no hesitancy in determining that reasonable minds would not differ in reaching the conclusion that an adequate supply of water to and within the Fricke home was necessary to make it habitable.

From time immemorial water has been a necessity for sustaining the physical well-being of humankind and a dwelling site to which it is not reasonably available is not habitable. While at one time a house that was close enough to allow its inhabitants to walk or ride to a water supply that could be taken and returned to the dwelling was one “fit for habitation,” this is no longer true in urban American society. Improved techniques of well drilling and the building of complex water supply and sewerage systems have created a reasonable expectation on the part of purchasers that every new urban dwelling will be supplied adequately with water, whether from a nearby well or from an area-wide supply system. We thus conclude that, unless exempted or excluded by the terms of the statute, a new dwelling that is without a proper supply of water breaches a vendor’s implied warranty of habitability under section 10-203 (a) (4). 7 Krol v. York Terrace Bldg., Inc., 35 Md. App. 321, 330 , 370 A. 2d 589, 594-95 (1977); Lyon v. Ward, 28 N.C. App. 446 , 221 S.E.2d 727, 729-30 (1976); see Forbes v. Mercado, 283 Or. 291 , 583 P. 2d 552, 553 (1978) (quality of water); Elderkin v. Gaster, 447 Pa. 118 , 288 A. 2d 771, 777 (1972) (same). ⁷¹⁷ Recognizing then that a proper supply of water had to be readily obtainable if this dwelling was to be “fit for habitation,” we next confront the issue of how much water need be available to meet that requirement.

In this instance, the District Court, in finding the Fricke’s water supply to be adequate, concluded that the original well, from the date of the initial test in November 1975, continued to meet the applicable building code provision — the county health department’s minimum yield requirement