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Court Rules Limited Warranty Does Not Waive Home Builder's Legal Duty of 'Workmanlike Construction Using Ordinary Care'

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2010-1826.  Jones v. Centex Homes, Slip Opinion No. 2012-Ohio-1001.
Franklin App. Nos. 09AP-1032 and 09AP-1033, 189 Ohio App.3d 668, 2010-Ohio-4268.  Judgment of the court of appeals reversed and cause remanded.
O'Connor, C.J., and Pfeifer, Lundberg Stratton, O'Donnell, Lanzinger, and McGee Brown, JJ., concur.
Cupp, J., concurs in judgment only.
Opinion: http://www.supremecourt.ohio.gov/rod/docs/pdf/0/2012/2012-Ohio-1001.pdf

Video clip View oral argument video of this case.

(March 14, 2012) The Supreme Court of Ohio held unanimously today that a home builder’s duty to construct a home “in a workmanlike manner using ordinary care” is a duty imposed by law, and that a home buyer’s right to enforce that duty cannot be waived.

Applying that analysis to a Franklin County case, the court ruled that two couples who purchased new houses from Centex Homes were not barred from asserting claims against Centex for an alleged failure of workmanlike construction despite the fact that their claims were based on a defect that was not listed as a covered item in a limited warranty that was part of their purchase agreements with Centex.

The court’s 7-0 decision, authored by Justice Paul E. Pfeifer, reversed a ruling by the Tenth District Court of Appeals.

The couples, Eric and Ginger Estep and Paul Jones and Latosha Sanders, purchased new homes from Centex in 2004.  After moving in, both couples found that their computers, cordless telephones and televisions did not operate properly. They alleged that the problems were caused by steel beams used in the construction of their houses that were magnetized, and sought remediation of the problem by Centex. 

When the problem was not resolved, both couples filed suit against Centex in the Franklin County Court of Common Pleas, asserting claims for breach of contract, breach of express and implied warranty, negligence, and failure to perform in a workmanlike manner. Because the suits asserted virtually identical claims against the same defendant, they were consolidated.

Centex moved for summary judgment, arguing that in both cases the buyers had waived all express or implied warranties except for a specific list of covered defects enumerated in a Limited Home Warranty that Centex provided in its standard purchase agreement. The trial court agreed that the buyers had waived their right to any express or implied warranty outside the provisions of the limited warranty,  including the right to demand workmanlike performance by Centex. Since the magnetizing of steel members was not among the defects included in the Centex limited warranty, the court  granted summary judgment in favor of the builder. On review, the Tenth District affirmed the decision of trial court.

The home buyers sought and were granted Supreme Court review of the Tenth District’s ruling.

In today’s decision, the court did not address the merits of the owners’ underlying claims against Centex, but reversed the lower courts’ rulings that by agreeing to the Centex limited warranty the home owners had waived their common law right to assert claims based on failure of workmanlike performance, and remanded the case to the trial court for consideration of those claims.

Justice Pfeifer wrote that the duty to construct a house in a workmanlike manner using ordinary care has been imposed on Ohio home builders since the Supreme Court’s 1966 decision in Mitchem v. Johnson.

In Mitchem, Justice Pfeifer wrote: “(H)ome buyers sought compensation for water damage resulting from their house having been built in a low portion of a lot with surface-water problems and without a foundation drainage system.  Notwithstanding the fact that no warranty covered the alleged defect, we concluded that the home buyers were entitled to recover damages if they could establish that the home builder had not constructed the house in a workmanlike manner, stating: ‘A duty is imposed by law upon a builder-vendor of a real-property structure to construct the same 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 proximately causes a defect hidden from revelation by an inspection reasonably available to the vendee, the vendor is answerable to the vendee for the resulting damages.’”

Justice Pfeifer also cited the Supreme Court’s 1982 decision in Velotta v. Leo Petronzio Landscaping, Inc.  In that case, he wrote: “The court clearly differentiated an implied warranty of suitability, which in effect would hold a builder strictly liable for defects in the structure, from the duty to construct in a workmanlike manner, which essentially holds a builder liable only for negligence. ... We concluded that although the obligation to construct in a workmanlike manner may arise from a contract, the cause of action is not based on contract but on a duty imposed by law ... Thus, we held that the duty (of workmanlike construction) applied in Velotta, even though no oral or written warranties had been offered or agreed to. ... In fact, the house had been sold ‘as is.’” 

“We conclude that in Ohio a duty to construct houses in a workmanlike manner using ordinary care is imposed by law on all home builders.”

In reversing the Tenth District’s holding that the home buyers’ acceptance of Centex’s limited warranty had waived their right to enforce the duty of workmanlike performance, Justice Pfeifer wrote:  “To determine whether a home buyer can waive his right to enforce this duty, we again turn to Mitchem and Velotta.  In Mitchem, we stated that all persons must ‘measure their conduct by that of the ordinarily prudent person under all the circumstances, which include the risk of harm from the natural and probable consequences of that conduct.’ ...  Having enunciated this general rule, we stated that it applied to home builders. ... In Velotta, we stated that the duty owed by a builder-vendor ‘is the duty imposed by law on all persons to exercise ordinary care.’ ... And we held that the duty applied even though the house had been sold ‘as is’ and there had been no express or implied warranties.”

We conclude 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. The 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. Accordingly, we conclude that a home builder’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.”

Justice Pfeifer’s opinion was joined by Chief Justice Maureen O’Connor and Justices Evelyn Lundberg Stratton, Terrence O’Donnell, Judith Ann Lanzinger and Yvette  McGee Brown.  Justice Robert R. Cupp concurred in judgment only.

Steve J. Edwards, 614.875.6661, for home buyers Paul Jones and Latosha Sanders and Eric and Ginger Estep.

Michael G. Long, 614.464.6297, for Centex Homes.