Amended February 23, 2015 Rosauer Corporation v. Sapp Development, L.L.C. Todd Sapp Whispering Creek, L.L.C. and W.C. Development, Inc. ( 2014 )

IN THE SUPREME COURT OF IOWA
No. 13–1285
Filed December 12, 2014
Amended February 23, 2015
ROSAUER CORPORATION,
Appellant,
vs.
SAPP DEVELOPMENT, L.L.C.; TODD SAPP; WHISPERING CREEK,
L.L.C.; and W.C. DEVELOPMENT, INC.,
Appellees.
On review from the Iowa Court of Appeals.
Appeal from the Iowa District Court for Woodbury County,
Duane E. Hoffmeyer, Judge.
Residential developer seeks further review of court of appeals
decision affirming summary judgment that dismissed claim implied
warranty of workmanlike construction applied to sale of building lot
without a dwelling. DECISION OF COURT OF APPEALS AND
JUDGMENT OF DISTRICT COURT AFFIRMED.
Paul D. Lundberg of Lundberg Law Firm, P.L.C., Sioux City, for
appellant.
Patrick L. Sealy and John C. Markham of Heidman Law Firm,
L.L.P., Sioux City, for appellees.
2
WATERMAN, Justice.
In this appeal, we must decide whether to extend the implied
warranty of workmanlike construction to the sale of a residential lot
without a home or other structure. The plaintiff, a contractor-developer,
bought the lot from a realtor to build townhomes for sale. He alleges the
lot had improperly compacted backfill, requiring extensive additional
work to get it ready for construction. Plaintiff sued the original
developers whose contractor had performed the substandard soil work.
The district court granted defendants’ motion for summary judgment,
ruling that the implied warranty did not apply to the sale of a lot without
a dwelling. The court of appeals affirmed, appropriately deferring to our
court whether to extend the implied warranty to this scenario. We
granted further review.
We now join the majority of courts reaching this question and hold
the implied warranty of workmanlike construction does not apply to the
sale of a lot with no dwelling. As explained below, the implied warranty
was judicially created to protect residents from substandard living
conditions. The purpose of the implied warranty is to redress the
disparity in expertise and bargaining power between consumers and
builder-vendors in recognition of the difficulty of discovering latent
defects in complex modern residential structures. We decline to extend
the implied warranty to the sale of land between developers able to
protect themselves through express contract terms and simple soil tests. 1
Accordingly, we affirm the decision of the court of appeals and the
judgment of the district court.
1In Luana Savings Bank v. Pro-Build Holdings, Inc., decided today, we decline to
extend the implied warranty to allow claims by a foreclosing lender that acquired the
buildings by deed in lieu of foreclosure. 856 N.W.2d 892, 902 (Iowa 2014).
3
I. Background Facts and Proceedings.
Defendants, Todd Sapp and his company, W.C. Development,
L.L.C., developed a large residential subdivision, Royal Highland, out of
farmland on the southeast side of Sioux City, Iowa. W.C. Development
hired an engineer to prepare a topographical map, perform soil testing,
and create a plat. At the center of this dispute is lot 13 of the third
addition. The actual grading, backfilling, and compaction of lot 13 was
performed by Burkhardt Construction, hired by W.C. Development. W.C.
Development also hired Certified Testing Services (CTS) to ensure that
the fill and soil compaction were done correctly. In April 2003, W.C.
Development sold lot 13 to Kenneth Beaulieu, a realtor.
Plaintiff, Rosauer Corporation, owned by Anthony Rosauer, is a
home building and landscaping corporation doing business since 1997.
Rosauer purchased lot 13 from Beaulieu for $50,000 on July 24, 2007.
It was Rosauer’s first purchase of a residential building lot. The lot was
subject to restrictive covenants, and Rosauer planned to build two
townhomes for sale. Before he purchased lot 13, Rosauer heard rumors
that homes in the development were settling due to soil compaction
problems. Rosauer nevertheless failed to request any soil tests on lot 13
before he bought it. After the sale was final, Rosauer’s lender required
soil testing on the lot, which revealed undocumented fill with
inconsistent moisture levels. CTS recommended complete removal and
replacement of existing fill material before building on lot 13. Rosauer
telephoned Sapp to discuss the CTS report. During this phone call,
Sapp told Rosauer that the problem had happened on several other lots,
and W.C. Development had paid extra costs associated with soil work for
those lots. They had no further discussions before this litigation
commenced. Rosauer spent $76,858 to comply with the CTS
4
recommendations, with $69,995 of the work completed by his own
landscaping company.
Rosauer ultimately built two townhomes on lot 13 and continued
to buy other lots in the same development. As he purchased additional
lots, Rosauer requested soil testing, but the lot owners refused, asserting
liability concerns. Rosauer then negotiated contractual provisions that
allowed the option of rescission of those purchases based on postsale soil
testing.
In June 2012, Rosauer filed this lawsuit to recover the costs of the
soil work on lot 13, naming Sapp and W.C. Development as defendants
on theories of negligence and breach of implied warranty. Sapp moved
for summary judgment, alleging that Rosauer’s economic losses were not
recoverable in tort and that Iowa courts had not recognized a claim for
implied warranties in the sale of unimproved land. Rosauer conceded
that the economic loss doctrine precluded recovery in negligence, 2 but
resisted summary judgment on his implied warranty claims. The district
court granted summary judgment for Sapp, reasoning that the land was
an unimproved lot lacking a dwelling, and therefore the implied warranty
of workmanlike construction did not apply. Rosauer appealed, and we
transferred the case to the court of appeals. The court of appeals
affirmed, declining to extend the implied warranty to land without a
dwelling. We granted further review to decide whether to extend the
implied warranty of workmanlike construction to these facts.
II. Standard of Review.
We review rulings that grant summary judgment for correction of
errors at law. Parish v. Jumpking, Inc., 719 N.W.2d 540, 542 (Iowa
2The economic loss doctrine is not at issue in this appeal.
5
2006). Summary judgment is appropriate when there is no genuine
issue of material fact and the moving party is entitled to judgment as a
matter of law. Iowa R. Civ. P. 1.981(3). We view the evidence in the light
most favorable to the nonmoving party. Parish, 719 N.W.2d at 543.
III. Analysis.
We must decide whether to extend the implied warranty of
workmanlike construction to the sale of land without a dwelling. This is
a question of first impression in Iowa. We begin our analysis with a
review of the history of the implied warranty of workmanlike construction
in our state and the policies underlying that doctrine. Then we examine
the elements of the implied warranty as applied to the sale of a lot. Next,
we determine whether the underlying policies support extending the
doctrine to these facts. Finally, we examine cases from other
jurisdictions adjudicating whether to allow implied warranty claims on
the sale of lots without dwellings. We conclude the doctrine should not
be extended to the sale of lots between developers.
A. The Implied Warranty of Workmanlike Construction in
Iowa. Iowa has long recognized in construction contracts an implied
warranty that a building “ ‘will be erected in a reasonably good and
workmanlike manner’ ” and that it “ ‘will be reasonably fit for the
intended purpose.’ ” See Busker v. Sokolowski, 203 N.W.2d 301, 303
(Iowa 1972) (quoting Markman v. Hoefer, 252 Iowa 118, 123, 106 N.W.2d
59, 62 (1960) (discussing the implied warranty found in construction
contracts)); see also Smith & Nelson v. Bristol, 33 Iowa 24, 25 (1871)
(stating the rule that in a construction contract that did not express a
specific manner in which work was to be done, the work “was to be done
in a workmanlike manner”). This warranty, however, was not initially
recognized in residential construction.
6
In Mease v. Fox, we recognized an implied warranty of habitability
in a residential lease. 3 200 N.W.2d 791, 793–95 (Iowa 1972) (describing
the retreat from the common law of caveat emptor in leases and the
growing trend of implying a warranty of habitability). Mease emphasized
that changing housing conditions gave a tenant far less bargaining power
than landlords. Id. at 794 (describing a tenant’s inability to know about
potential housing law violations or deficiencies on the premises).
We did not adopt the implied warranty of workmanlike
construction in the sale of residential real estate until our decision in
Kirk v. Ridgway. See 373 N.W.2d 491, 493–94, 496 (Iowa 1985)
(explaining that there had been no prior implied warranties in Iowa
residential real estate contracts). “Traditionally, the common law
presumed the home buyer was on the same footing as the seller because
he or she could inspect the property and negotiate accordingly.
Therefore, each side should live with the bargain.” Dee Pridgen,
Consumer Protection and the Law § 18:2, at 18-3 (2002). After World War
II, sales of premade homes that builder-vendors mass-marketed to
consumers increased dramatically, and purchasers complained of
shoddy construction. Id. § 18:2, at 18-4. Because of the harshness of
the common law, courts began to recognize implied warranties in the sale
of a home for the protection of innocent consumers. See Kirk, 373
N.W.2d at 493.
In Kirk, we adopted an implied warranty of workmanlike
construction in the sale of new homes by a builder-vendor. See id. at
496. Kirk had purchased a new home from Ridgway, a contractor who
3The common law implied warranty of habitability adopted in Mease to protect
tenants has been codified by the Uniform Residential Landlord and Tenant Act, Iowa
Code chapter 562A. See Crawford v. Yotty, 828 N.W.2d 295, 299 (Iowa 2013).
7
built and owned the home. Id. at 492. After purchasing the home, Kirk
discovered peeling paint resulting from defective construction and
brought an action for breach of an implied warranty. Id. The district
court found that Ridgway had breached the implied warranty of
workmanlike construction, and on appeal we addressed the situation in
which “a prospective homeowner does not hire the builder to build the
house but buys one from him already built.” Id. at 492–93.
In Kirk, we gave three reasons for adopting the implied warranty of
workmanlike construction in the sale of a new home. Id. at 493–94.
First, we noted the change in house-construction techniques “from
single-unit construction under the supervision of the owner, to the tract
development commonly found today.” Id. at 493. Second, we noted the
increasing interest other courts had taken in consumer protection in real
estate transactions. Id. Finally, we pointed out the increasing
complexity of home construction makes it more difficult for the buyer to
discover latent defects, requiring a buyer to rely on the skill and
judgment of the builder. Id. at 494. We concluded that the adoption of
the implied warranty was a “logical extension of Mease,” protecting the
innocent purchaser of a home who must rely on the skill of another for
the basic condition of their habitation. Id. at 496. In Kirk, we adopted
the following “generally recognized” elements for the newly adopted
implied warranty:
(1) That the house was constructed to be occupied by
the warrantee as a home;
(2) that the house was purchased from a builder-
vendor, who had constructed it for the purpose of sale;
(3) that when sold, the house was not reasonably fit for
its intended purpose or had not been constructed in a good
and workmanlike manner;
8
(4) that, at the time of purchase, the buyer was
unaware of the defect and had no reasonable means of
discovering it; and
(5) that by reason of the defective condition the buyer
suffered damages.
Id.
We revisited the second element in Flom v. Stahly, 569 N.W.2d
135, 142 (Iowa 1997). In that case, the Stahlys began construction of a
home on land they owned, intending to live in it themselves. Id. at 137.
Before completing construction, the Stahly family moved out of state and
sold the incomplete home to the Floms. Id. at 137–38. When wood in
the home began to rot, the Floms sued under several theories, including
breach of implied warranty of workmanlike construction. Id. at 138–39.
We rejected this extension of Kirk because the Stahlys did not meet the
second element of the Kirk test—they were not builder-vendors building a
home for the purpose of sale. Id. at 142. Because the Stahlys had
intended to live in the house themselves and had never built a home for
resale before, the Stahlys did not have the same unequal relationship
with the Floms that a builder-vendor would have with a homebuyer.
We extended the implied warranty to subsequent purchasers of
homes in Speight v. Walters Development Co., 744 N.W.2d 108, 116 (Iowa
2008). Again, we emphasized the inequality in bargaining power between
a homebuyer and a builder-vendor, due to “the buyer’s lack of expertise
in quality home construction and the fact that many defects in
construction are latent. These defects, even if the home were inspected
by a professional, would not be discoverable.” Id. at 111. In choosing to
extend the implied warranty to subsequent purchasers, we noted its
purpose “is to ensure the home will be fit for habitation, a matter that
depends upon the quality of the dwelling delivered not the [privity] status
9
of the buyer.” Id. at 113 (internal quotation marks omitted). As in Kirk,
we were influenced by both the modern trend of the law in other
jurisdictions and changes in society. See id. at 113–14 (surveying other
jurisdictions that had adopted extensions similar to Speight and noting
that society is increasingly mobile, with more frequent resales of newer
homes).
The primary purpose behind the implied warranty of workmanlike
construction adopted in Kirk is the protection of consumers. See 373
N.W.2d at 494. Defects in home construction in stairways, heating and
cooling systems, or a defective wall or ceiling pose a risk of serious
injury. Id. The costs to remedy such defects “ ‘should be borne by the
responsible developer who created the danger . . . rather than by the
injured party who justifiably relied on the developer’s skill and implied
representation.’ ” Id. at 494 (quoting Schipper v. Levitt & Sons, Inc., 207
A.2d 314, 326 (N.J. 1965)). In Speight, we again emphasized the
significance of the actual habitation of the home. See 744 N.W.2d at
113. We have yet to extend the implied warranty beyond its purpose of
protecting consumers actually living in defectively built housing.
B. The Elements of Kirk’s Implied Warranty as Applied to the
Sale of a Lot With No Dwelling. Rosauer admittedly cannot satisfy the
first three elements of the Kirk test for the simple reason there was no
house or dwelling constructed or sold by the defendants. We briefly
address each element in turn.
1. The requirement that the house was constructed to be occupied
by the warrantee as a home. The first element limits the potential class
of plaintiffs to innocent homebuyers for whose benefit we created the
warranty. In this case, Rosauer purchased a vacant lot on which to
build townhomes to sell, rather than to build his own residence.
10
Rosauer thus is not within the class of persons that the implied warranty
was designed to protect. See Kirk, 373 N.W.2d at 496–97; see also
Speight, 744 N.W.2d at 111 (noting “home buyers are ill-equipped to
discover defects in homes, which are increasingly complex, and therefore
must rely on the skill and judgment of the vendor”); Cook v. Salishan
Props., Inc., 569 P.2d 1033, 1035 (Or. 1977) (en banc) (“[P]laintiffs have
not convinced us that purchasers of developed but unimproved land, as
a class, need the additional protection of the application of warranty
. . . .”). As our court of appeals observed, “Rosauer is not the kind of
naïve purchaser the implied warranty normally works to protect. As a
commercial investor, Rosauer would have more skills than the average
consumer to determine if the lot was suitable for building.” We agree.
2. The requirement that the house was purchased from a builder-
vendor, who had constructed it for the purpose of sale. Just as the first
element limits the class of potential plaintiffs, the second element limits
the class of potential defendants to a builder-vendor doing construction
for the purpose of sale. In Kirk, we adopted the following definition for
the term “builder-vendor”:
“[A] person who is in the business of building or assembling
homes designed for dwelling purposes upon land owned by
him, and who then sells the houses, either after they are
completed or during the course of their construction,
together with the tracts of land upon which they are
situated, to members of the buying public.
The term ‘builder’ denotes a general building
contractor who controls and directs the construction of a
building, has ultimate responsibility for a completion of the
whole contract and for putting the structure into permanent
form thus, necessarily excluding merchants, material men,
artisans, laborers, subcontractors, and employees of a
general contractor.”
373 N.W.2d at 496 (quoting Jeanguneat v. Jackie Hames Constr. Co., 576
P.2d 761, 762 n.1 (Okla. 1978)). Other jurisdictions have adopted
11
essentially the same definition. See Elderkin v. Gaster, 288 A.2d 771,
774 n.10 (Pa. 1972) (“A builder-vendor . . . refers to one who buys land
and builds homes upon that land for purposes of sale to the general
public.”); Frickel v. Sunnyside Enters., Inc., 725 P.2d 422, 424–25 (Wash.
1986) (en banc); Bagnowski v. Preway, Inc., 405 N.W.2d 746, 750 (Wis.
Ct. App. 1987).
When no dwelling has been constructed at the time of the sale of
property, we do not have a builder-vendor, only a vendor. It is true that
defendants W.C. Development and Sapp acquired the land for sale and,
through a subcontractor, graded and backfilled the lot in preparation for
its sale. However, the defendants constructed no home on the lot and
sold only the land without any dwelling. The definition we adopted in
Kirk and reaffirmed in Flom is clear—a builder-vendor must construct a
home on land it owns for purposes of sale to the public. In this case, the
defendants are land developers, not builder-vendors. Indeed, Rosauer is
the builder-vendor of the townhomes he built on this lot. Rosauer
cannot meet the second element requiring proof the defendant is a
builder-vendor.
3. The requirement that the house was unfit for its intended
purpose or defectively built. Rosauer also cannot satisfy the third
element of the Kirk test because there was no house sold by defendant
that was defectively built or unfit for its intended purpose. See 373
N.W.2d at 496. Builders generally sell homes they hold out “ ‘to the
public as fit for use as a residence, and of being of reasonable quality.’ ”
Id. at 494 (quoting Smith v. Old Warson Dev. Co., 479 S.W.2d 795, 798
(Mo. 1972) (en banc)).
This case, however, involves more than a sale of raw land. Rather,
the lot at issue was graded, backfilled, and compacted by defendants’
12
subcontractor. The evidence supports a finding that the work was
substandard, requiring costly additional soil work by Rosauer. We will
now examine the policies underlying Iowa’s implied warranty doctrine to
decide whether it should be extended to the sale of a lot without a
dwelling.
C. The Public Policies Underlying the Implied Warranty of
Workmanlike Construction. In Kirk, we identified several reasons to
extend an implied warranty to new homeowners: changes in construction
techniques, a growing consensus in other jurisdictions that implied
warranties should extend to protect consumer-homeowners, the
increasing complexity of homes, and our concern for the safety and living
standards of persons inhabiting new houses. Kirk, 373 N.W.2d at 493–
96. None of these concerns apply with the same force to a developer’s
purchase of land without a dwelling. First, as discussed below, the
majority of jurisdictions have declined to extend the implied warranty to
the sale of land with no dwelling. Second, while many features a
homebuyer would need to inspect in order to make an informed decision
are hidden behind walls or inaccessible without costly and destructive
testing, land is easily inspected before purchase. See Cook, 569 P.2d at
1035 (“Land is accessible for inspection before it is purchased.”).
Rosauer argues that the defect in the land was latent because it was
below the surface, but a routine, nondestructive soil test revealed the fill
issues in lot 13. While modern homes involve complex construction
techniques, land that has been graded and backfilled is comparatively
simple to inspect. See id.
Third, homes are built as a final product for habitation. A
homebuyer relies on the expertise of the builder. Kirk, 373 N.W.2d at
494. The safety and health of the buyers is at stake as soon as they
13
enter into the home. Id. at 493 (“[T]he courts which have given relief to
the purchaser of a new house . . . put their theory of recovery on the
breach of an implied warranty of fitness for human habitation . . . .”
(internal quotation marks omitted)). By contrast, the developer
purchasing land without a dwelling is not relying on the seller to
construct habitable housing. Instead, the purchasing developer has the
responsibility to take all the steps necessary to construct a safe dwelling
on the lot, using its own expertise.
Finally, the overriding policy of our decision in Kirk was the
protection of innocent homeowners who lacked sophistication and
bargaining power to protect themselves. See 373 N.W.2d at 494. As a
class, for-profit developers in the business of construction are not in
need of judicially imposed implied warranties to redress disparities in
expertise or bargaining power. Rather, the developer can protect itself
through inspections and express contract provisions. Rosauer argues he
should not be considered a sophisticated developer because this is the
first residential construction lot that he purchased. Alternatively, he
argues that the sophistication of the purchaser should not be
determinative when workmanship is faulty. However, the record shows
that Rosauer has been in the landscaping and construction business
since 1997 and owned a business capable of doing the majority of the
soil work. He had substantially more sophistication and knowledge of
construction, fill, and grading than an average homebuyer. Rosauer
concedes there was no disparity in bargaining power with Beaulieu at the
time of the lot purchase. Indeed, Beaulieu agreed to float the land to
Rosauer without requiring payment up front. Rosauer’s own experience
acquiring subsequent lots shows how developers can protect their
interests contractually. Rosauer purchased the additional lots subject to
14
express contract terms he negotiated that allowed rescission if the soil
sample taken after purchase was unsatisfactory.
Homebuyers are a class apart from developers such as Rosauer.
Iowa’s existing implied warranty of workmanlike construction protects
consumers buying their own residences. Homeowners are seeking the
basic necessity of shelter, often with a time limit imposed by career or
family demands. Conklin v. Hurley, 428 So. 2d 654, 659 (Fla. 1983). For
many persons, the home is the largest investment they will ever make,
involving a major percentage of their income and savings. Id.
Substandard construction of their homes may lead to health hazards or
financial ruin. Id. We do not see the same reasons to protect developers
speculating in real estate for profit. “Those who speculate in land, as a
class, simply do not need the sort of protection [offered by an implied
warranty].” Id. An investor or developer risks a financial setback, but
does so with the hope and expectation of gain. If the land is not as fit as
the investor or developer hoped for construction, it may prove to be a bad
risk, but is unlikely to be catastrophic for the developer. Id. We
conclude that unlike homeowners, for-profit developers do not require
the protection of a judicially imposed implied warranty of workmanlike
construction.
D. Caselaw in Other Jurisdictions on the Applicability of
Implied Warranties for the Sale of Lots Without Dwellings. In both
Kirk and Speight, we looked to caselaw from other jurisdictions for
guidance to determine national trends in the scope of implied warranties
of workmanlike construction. We do so again today.
A majority of courts to address the question decline to extend the
implied warranty of workmanlike construction to the sale of lots with no
dwelling. See, e.g., DeAravjo v. Walker, 589 So. 2d 1292, 1293 (Ala.
15
1991) (applying the doctrine of caveat emptor to the purchase of
unimproved land); Conklin, 428 So. 2d at 658 (recognizing a distinction
between modern home-buying practices and traditional real estate sales
of land, and concluding that land with a defective seawall was
“essentially an empty lot” that did not carry an implied warranty);
Lehmann v. Arnold, 484 N.E.2d 473, 477 (Ill. App. Ct. 1985) (concluding
“it would be unfair to impose a warranty of habitability on the seller of
unimproved land for a house that has not yet been built”); San Luis
Trails Ass’n v. E.M. Harris Bldg. Co., 706 S.W.2d 65, 69 (Mo. Ct. App.
1986) (“Plaintiff here has not alleged deterioration of a house . . . and
cannot recover damages based on implied warranty.”); Cook, 569 P.2d at
1035 (“[W]hile it is true that the ordinary purchaser of subdivided land
relies . . . on the expertise of the developer, the degree of the purchaser’s
necessary reliance is not as great as that of the purchaser of a home.”);
Jackson v. River Pines, Inc., 274 S.E.2d 912, 913 (S.C. 1981) (declining to
extend the implied warranty to the sale of land for construction).
Rosauer argues that, while lot 13 did not have a structure when he
purchased it, it had been backfilled and compacted. Further, the land
was subject to restrictive covenants limiting new construction to
residences. Therefore, Rosauer claims, the land was not raw but instead
developed and marketed as a buildable lot, and his expectation that it
would be buildable should be backed by an implied warranty. What is
significant for our purposes is that lot 13 was sold without a dwelling. In
any event, other courts have rejected the argument that work preparing
lots for new construction or restrictive covenants give rise to the implied
warranty of workmanlike construction on the sale of a lot without a
dwelling. See Morris v. Strickling, 579 So. 2d 609, 610–11 (Ala. 1991)
(concluding that a seller who constructed curbs, gutters, drainage
16
ditches, and sewers in a development still sold unimproved land where
there was no building upon the lot); Cook, 569 P.2d at 1034 (declining to
extend the warranty to the sale of land subject to a residential restrictive
covenant); Jackson, 274 S.E.2d at 912–13 (concluding that restrictive
covenants on the land did not require extension of implied warranty).
A few courts have extended implied warranties to improved lots
without a dwelling. In Rusch v. Lincoln–Devore Testing Laboratory, Inc.,
the court awarded relief to a purchaser for defective fill in a building lot.
698 P.2d 832, 835 (Colo. App. 1984). However, the holding was narrowly
limited to proof of actual reliance. Id. (holding that “if [a] vendor has
reason to know that the purchaser is relying upon the skill or expertise
of the vendor in improving the parcel . . . , and the purchaser does in fact
so rely, there is an implied warranty”). Another court gave relief under
similar facts through the contractual doctrine of mutual mistake. See
Hinson v. Jefferson, 215 S.E.2d 102, 110–11 (N.C. 1975). The Hinson
court relied on a finding that a reasonable inspection would not have
disclosed the defect in that case. Id. at 111. By contrast, Rosauer could
have discovered the fill problems with a simple soil test and in fact did so
after his purchase.
Two other appellate courts have adopted an implied warranty in
sale of building lots without a dwelling when the purchaser was closer to
our description in Kirk of an innocent homebuyer. See Overton v.
Kingsbrooke Dev., Inc., 788 N.E.2d 1212, 1218 (Ill. App. Ct. 2003) (“We,
too, believe that the same public policy concerns apply for the protection
of a buyer from a developer/seller as those that apply for the protection
provided to buyers in [cases similar to Kirk].”); Jordan v. Talaga, 532
N.E.2d 1174, 1185–86 (Ind. Ct. App. 1989) (concluding that developers
who graded lots were in the best position to decide suitability). In
17
Jordan, the defendant platted and graded the lot, sold it to a second
developer who built a home, which was then sold to the plaintiff-
homebuyer. 532 N.E.2d at 1178. The court determined, based on the
experience and sophistication of the initial developers, that they should
have discovered the latent drainage defects in the lot and never sold it as
buildable. Id. at 1185–86. Similarly, in Overton, the plaintiffs were
relatively unsophisticated consumers who bought the lot in order to hire
a contractor to build their residence there. 788 N.E.2d at 1214. These
cases are distinguishable in that the plaintiffs were unsophisticated
homeowners, not developers like Rosauer.
Our survey shows the caselaw extending the implied warranty to
the sale of lots is sparse. The weight of authority nationally limits the
implied warranty of workmanlike construction to the sale of homes
already built. We join the majority of courts to hold that the implied
warranty of workmanlike construction in our state does not extend to a
developer’s purchase of a lot without a dwelling.
IV. Disposition.
For these reasons, we decline to extend the implied warranty of
workmanlike construction to a for-profit developer’s purchase of a lot
with no dwelling, regardless of the work performed by the seller to make
the lot buildable. We therefore affirm the decision of the court of appeals
and the district court’s summary judgment in favor of defendants.
DECISION OF COURT OF APPEALS AND JUDGMENT OF
DISTRICT COURT AFFIRMED.
All justices concur except Wiggins and Appel, JJ., who concur
specially, and Hecht, J., who takes no part.
18
#13–1285, Rosauer Corp. v. Sapp Dev.
WIGGINS, Justice (concurring specially).
The rationale behind the implied warranty of workmanlike
construction is to ensure a dwelling “will be fit for habitation.” Speight v.
Walters Dev. Co., 744 N.W.2d 108, 113 (Iowa 2008) (internal quotation
marks omitted). The rationale behind the warranty does not apply to
land that does not include a structure designed for human habitation. It
is for this reason, I concur in the result only.
Appel, J., joins this special concurrence.