Builders' Implied Warranty of Quality Extends to Work Beyond the Home

by James R. Keller

This article appeared in St. Louis Construction News & Review, p. 20, May-June, 2003.

For years contractors and homeowners have fought over the extent to which a contractor's work was covered by an implied warranty of quality and fitness. In two recent cases, Missouri's courts have extended the coverage to areas beyond the home itself, perhaps signaling that contractors can expect to see more claims of construction problems to work they did on a typical home project. The cases are Hershewe v. Perkins, WD 61650 (Mo. App. WD 2003) and Wilkinson v. Dwiggins, 80 S.W.3d 849 (Mo. App. ED 2002).

Since 1972, Missouri has recognized that a new homeowner has a claim for an implied warranty of quality and fitness against the contractor. This claim only applies, however, to the first purchaser of a new home and then only if the seller of the home also was the builder.

The concept is that the purchaser of a new home should have at least as much protection as the purchaser of a new car, a gas stove, a sump pump or a ladder. In fact, the purchase of a new home may be much more problematic because the structural quality of a house, according to theHershewe court, is "nearly impossible to determine by inspection after the house is built, since many of the most important elements of its construction are hidden from view." Therefore, the purchaser has to rely on the builder.

For years many thought that the implied warranty did not apply to an improvement outside the house that was not an integral part of the structure or immediately supporting the house. In 1989, a Missouri appellate court made clear that for an implied warranty to apply, it was not essential that the item in question be attached to the home or provide immediate structural support to the home.

The critical issue was whether the item in question was integral to the home's use. Therefore, the court decided in 1989 that a driveway and stairs leading to a new residence were covered under the implied warranty of quality and fitness.

The dispute in Hershewe was whether an implied warranty could extend to defective retaining walls. One retaining wall contained Keystone that had collapsed next to the house. Another wall was stone that could not hold back the dirt because there was no back support or small rock fill material. Rainwater ran through the walls and potentially into the house.

The court determined that retaining walls played an important role in the enjoyment of the resident's home. The implied warranty covers these walls because they are part of the items surrounding the home that are critical to its function and viability.

In all, there were five retaining walls, four of which needed the installation of a geogrid system at least six to eight feet behind the walls in accordance with Keystone's specifications. The walls also needed fill of three-quarter-inch to one-inch rock and 250 standard blocks to cover additional repairs.

Two experts testified at trial to establish a total repair cost of $30,000. One was a civil and structural engineer and the other owned a landscaping business. The appellate court upheld the judgment of $30,000 in favor of the homeowner to pay for the cost to rebuild these walls.

In Wilkinson v. Dwiggins, the issue was whether the implied warranty of quality and fitness applied when a contractor had installed a septic system as part of a "spec" home. Both the state and county governments had approved the design and installation of the septic system.

Within a month after moving into the new home the homeowners noticed seepage above ground from the septic system and asked the builder and its subcontractor to make repairs. In response the contractor made several repairs but effluent continued to leak above the ground.

At trial the homeowners and the contractor presented differing testimony as to the cause of the leak. In the end, the trial judge denied any award of damages that was based on a theory of implied warranty of quality and fitness.

The trial court reasoned that the state and county governments had taken away from the contractor all discretion about how to build the system. Since the governments also disclaimed any guarantee that the system would work, the contractor had no warranty, implied or otherwise, to give regarding the septic system.

The appellate court disagreed. It found instead that the contractor could be liable under a theory of implied warranty and that the government regulations did not strip the builder of all decision-making authority in building the system. In fact, on appeal, even the contractor conceded this point. The case returned to the trial court to determine whose fault it was that the system leaked.

James R. Keller is a partner at Herzog, Crebs & McGhee, LLP, St. Louis, MO, where he concentrates on business litigation, construction law and ADR. He also is a neutral/arbitrator with the American Arbitration Association and a mediator.