decided: March 20, 1972.
ELDERKIN ET UX., APPELLANTS,
Appeal from decree of Court of Common Pleas of Delaware County, No. 3558 of 1967, in case of Richard L. Elderkin and Clair H. Elderkin v. Gerald N. Gaster.
Joseph T. Doyle, with him Trevaskis, Doyle, Currie, Nolan & Bunting, for appellants.
Dale A. Betty, with him Kassab, Cherry, Curran & Archbold, for appellee.
Bell, C. J., Jones, Eagen, O'Brien, Roberts, Pomeroy and Barbieri, JJ. Opinion by Mr. Justice Pomeroy. The former Mr. Chief Justice Bell and the former Mr. Justice Barbieri took no part in the decision of this case. Concurring Opinion by Mr. Justice Eagen.
[ 447 Pa. Page 119]
This appeal arises out of a dispute concerning an agreement of sale, under the terms of which the appellants agreed to purchase from the appellee a lot and home to be constructed thereon. The water supply for this home was to be provided by a private well drilled on the lot. It is undisputed that appellee, the buildervendor of the home, adequately constructed the home and the well; it is also undisputed that the well has never produced water of a quality suitable for human consumption. Appellants refused to release the remaining balance in the construction fund unless and until appellee would provide them with an adequate supply of unpolluted water. Appellee sued the appellants for the balance of the construction fund, whereupon appellants brought suit in equity against appellee praying that he be ordered to supply them with an adequate quantity of water fit for human consumption. The two causes were consolidated for hearing and tried before a judge sitting without a jury. The lower court ruled in favor of appellee in both suits and awarded appellee the monies due him under the construction agreement. Although finding that it was not appellee's duty to supply the home buyers with a source of potable water, the trial judge nevertheless ordered the builder-vendor to redrill the well to the deepest water bearing stratum on appellants' property. The Elderkins appeal,*fn1 and we reverse.
[ 447 Pa. Page 120]
A more detailed statement of the background is necessary. The pertinent facts are as follows: Appellee Gaster subdivided an area of land owned by him and referred to in the record as Spring Valley, Middletown Township, Delaware County, into 32 lots, each approximately one acre in size. Gaster would sell a lot to an interested purchaser only if the purchaser concurrently agreed to have Gaster construct a home on the property. For sales purposes, appellee maintained a model home in the development.
On January 16, 1963, Gaster and the Elderkins entered into an agreement whereby the latter would purchase a lot and home in Spring Valley for a total consideration of $26,430, $500 of which was paid at the signing of the sales agreement. The balance was to be paid partially at settlement of the sale transaction and partially under the terms of a subsequently executed construction agreement. On January 31, 1963, appellee deeded a lot to appellants for the consideration of $6,000,*fn2 and the parties executed a construction agreement obligating the appellee to construct a house, similar to the display house, on appellants' lot. For this service appellant was to receive a total of $20,430 in installment payments to be paid at various stages of construction. It was the final $4,086 of this fund, withheld by appellants, that appellee was awarded by the lower court.
Attached to the construction contract was a list entitled "Description of Materials", which noted the detailed
[ 447 Pa. Page 121]
specifications of the materials which would be used in constructing the several parts of the Elderkins' home. Pertinent to this case is the notation, under heading "Plumbing", that the water supply would be by "individual (private) system."*fn3 Otherwise, the agreement of sale, the deed to the lot, and the construction agreement are silent on the matter of water supply or the quality of the water to be supplied.*fn4
Appellants took possession of the premises on June 1, 1963, when the house, except for the private well, was substantially completed. The well was completed and water supplied to the home on June 17, 1963.*fn5 Shortly thereafter appellants had the water from their well tested by chemical analysis.*fn6 These tests showed the water to contain concentrations of organic nitrates and synthetic detergent in excess of the limits noted by the "Public Health Service Drinking Water Standards (Revised 1962)" published by the United States Department of Health, Education and Welfare.*fn7 Appellants continued to have tests performed on their
[ 447 Pa. Page 122]
water supply up to the time of the lower court hearing in this case in 1967. The tests consistently showed the nitrate content of the well water to be at least four times greater than the standard promulgated by the United States Department of Health, Education and Welfare.*fn8 All of the experts testifying in the lower court agreed that because of this condition appellants' water supply was unfit for human consumption.*fn9
On this appeal appellants maintain that the buildervendor of a home impliedly warrants that the home has been constructed in a reasonably workmanlike manner and that the dwelling is habitable. As applied to their particular home, appellants contend that this warranty was breached because they were not supplied with an adequate source of potable water.
Appellee Gaster's argument, accepted by the lower court, is two-fold: (1) the deed of appellants' lot carried with it the rights to subsurface water and if any warranties as to its quality were to come into existence, these qualities had to be expressly stated in the deed
[ 447 Pa. Page 123]
(which they were not); and (2) that any implied warranty that a structure will be completed in a workmanlike manner and be reasonably fit for the purpose intended extends only to completing a functional well and does not extend to the purity of the water produced by the well.
Appellants urge this Court to view the instant transaction as the sale of a "single-package" by the buildervendor, as opposed to a situation involving two isolated transactions, viz., (1) the conveyance of the lot by deed and (2) the construction of the house according to contract. The lower court treated the transaction severably, stating that "[t]he single-package theory pushed for by [appellants], falls into the deep pit of caveat emptor. . . ."
The record plainly shows that the appellee was a real estate developer and was the builder-vendor of appellants' residence.*fn10 Although the sale of the lot and home was consummated in a two-step process, it is clear that the basic agreement between the parties was that appellee would furnish appellants, for an agreed consideration, a home located in appellee's development. In fact, appellants could not have moved into the development had they not agreed to purchase both the house and lot from appellee. Accordingly, we direct our attention to whether any warranties are implied by a builder-vendor when he sells a "single-package" -- a new house and a lot -- to his customer.
The common law doctrine of caveat emptor, the antithesis of implied warranty, historically applied to sales of both real and personal property in this Commonwealth, although its application to personal property sales has been restricted by the enactment of the
[ 447 Pa. Page 124]
Uniform Commercial Code, Act of October 2, 1959, 12A P.S. § 1-101 et seq. Generally speaking, the rule is that in the absence of fraud or misrepresentation a vendor is responsible for the quality of the property being sold by him only to the extent for which he expressly agrees to be responsible.*fn11 See, e.g., Wolf v. Christman, 202 Pa. 475, 51 Atl. 1102 (1902); Pringle v. Rogers, 193 Pa. 94, 44 Atl. 275 (1899); Shisler v. Baxter, 109 Pa. 443 (1885); Lord v. Grow, 39 Pa. 88 (1861); Bailey v. Gibson, 20 Pa. Superior Ct. 429 (1902). The theory of the doctrine is that the buyer and seller deal at arm's length, each with an equal means of knowledge concerning the subject of the sale, and that therefore the buyer should be afforded only those protections for which he specifically contracts. Appellant argues that while this postulate may have continuing validity with regard to real estate transactions generally, it is unrealistic as applied to sales of new homes by a buildervendor.
There are but few Pennsylvania decisions concerned with attaching implied warranties to the sale of a new home. In Stewart v. Trimble, 15 Pa. Superior Ct. 513 (1901) and Raab v. Beatty, 96 Pa. Superior Ct. 574
[ 447 Pa. Page 125]
(1929) our Superior Court held that a builder-vendor impliedly warrants good workmanship in the completion of what was at the time of sale a partially constructed building. Neither of these decisions involved an implied warranty of habitability,*fn12 but an English case substantially similar to Raab v. Beatty, supra, has been cited as the basis for a series of American decisions holding that the sale by its builder-vendor of a new home in the process of construction is accompanied by implied warranties of workmanlike construction and habitability. Miller v. Cannon Estates, Ltd.,  2 K.B. 113. This chain of cases from other jurisdictions includes Glisan v. Smolenske, 153 Colo. 274, 387 P. 2d 260 (1963); Weck v. A. M. Sunrise Construction Co., 36 Ill. App. 2d 383, 184 N.E. 2d 728 (1962); but see Coutrakon v. Adams, 39 Ill. App. 2d 290, 188 N.E. 2d 780 (1963); Vanderschrier v. Aaron, 103 Ohio App. 340, 140 N.E. 2d 819 (1957); Jones v. Gatewood, 381 P. 2d 158 (Okla. 1963); Hoye v. Century Builders, 52 Wash. 2d 830, 329 P. 2d 474 (1958). See also Perry v. Sharon Development Co.,  4 All. E.R. 390 (C.A.). The thesis of all these decisions is succinctly summarized in a quotation from Miller v. Cannon Hill Estates, supra, at 121: "[T]he whole object, as both parties know, is that there shall be erected a house in which the intended purchaser shall come to live. It is the very nature and essence of the transaction between the parties that he will have a house put up there which is fit for him to come into as a dwelling house. It is plain that in those circumstances there is an implication
[ 447 Pa. Page 126]
of law that the house shall be reasonably fit for the purpose for which it is required, that is for human dwelling."
Shortly after its decision in Glisan v. Smolenske, supra, the Colorado Supreme Court noted that the Miller rationale applied to the sale of new homes by a vendor-builder regardless of the stage of construction, i.e., partial completion or total completion, when the home was purchased. "That a different rule should apply to the purchase of a house which is near completion than would apply to one who purchases a new house seems incongruous." Carpenter v. Donohoe, 154 Colo. 78, 83, 388 P. 2d 399, 402 (1964). Since the Carpenter decision, nine other jurisdictions have likewise restricted the application of the doctrine of caveat emptor, holding it inapplicable to sales of new homes where the vendor is also the builder. Wawak v. Stewart, 247 Ark. 1093, 449 S. W. 2d 922 (1970); Bethlahmy v. Bechtel, 91 Idaho 55, 415 P. 2d 698 (1966); Weeks v. Slavick Builders, Inc., 24 Mich. App. 621, 180 N.W. 2d 503, aff'd, 384 Mich. 257, 181 N.W. 2d 271 (1970); Schipper v. Levitt & Sons, Inc., 44 N.J. 70, 207 A.2d 314 (1965); Rutledge v. Dodenhoff, 254 S.C. 407, 175 S.E. 2d 792 (1970); Waggoner v. Midwestern Development, Inc., 83 S.D. 57, 154 N.W. 2d 803 (1967); Humber v. Morton, 426 S.W. 2d 554 (Tex. 1968); Rothberg v. Olenik, 128 Vt. 295, 262 A.2d 461 (1970); House v. Thornton, 76 Wash. 2d 428, 457 P. 2d 199 (1969). See also Robertson Lumber Co. v. Stephen Farmers Coop. Elev. Co., 274 Minn. 17, 143 N.W. 2d 622 (1966). These decisions all hold that the builder-vendor of a new home impliedly warrants reasonable workmanship and habitability.*fn13 The warranties appear
[ 447 Pa. Page 127]
to apply whether the homes are purchased prior to construction, during construction, or after the dwelling has been constructed but not yet occupied.*fn14
Typical of the reasoning of these cases is that of the New Jersey Supreme Court in Schipper v. Levitt & Sons, Inc., 44 N.J. at 91-92, 207 A.2d at 326: "[The] contention that caveat emptor should be applied and the deed viewed as embodying all the rights and responsibilities of the parties disregards the realities of the situation. Caveat emptor developed when the buyer and seller were in an equal bargaining position and they could readily be expected to protect themselves in the deed.
[ 447 Pa. Page 128]
Buyers of mass produced development homes are not on an equal footing with the builder-vendors and are no more able to protect themselves in the deed than are automobile purchasers in a position to protect themselves in the bill of sale." Similarly, the Supreme Court of Texas in Humber v. Morton, 426 S.W. 2d at 562 concluded: "The caveat emptor rule as applied to new houses is an anachronism patently out of harmony with modern home buying practices. It does a disservice not only to the ordinary prudent purchaser but to the industry itself. . . ."
In Kellogg Bridge Co. v. Hamilton, 110 U.S. 108, 28 L. Ed. 86 (1884), the Supreme Court, speaking through the first Mr. Justice Harlan, stated that the law will imply a warranty of fitness for the purpose intended when a buyer has reason to rely upon and does rely upon the judgment of a seller who manufactures the product. We have concluded that one who purchases a development house conforms to this standard; he justifiably relies on the skill of the developer that the house will be a suitable living unit. Not only does a housing developer hold himself out as having the necessary expertise with which to produce an adequate dwelling, but he has by far the better opportunity to examine the suitability of the home site and to determine what measures should be taken to provide a home fit for habitation. As between the builder-vendor and the vendee, the position of the former, even though he exercises reasonable care, dictates that he bear the risk that a home which he has built will be functional and habitable in accordance with contemporary community standards. We thus hold that the builder-vendor impliedly warrants that the home he has built and is selling is constructed in a reasonably workmanlike manner and that it is fit for the purpose intended -- habitation.
[ 447 Pa. Page 129]
Having reached this conclusion, it remains to consider whether the deficiency of which appellants complain is within the purview of this warranty. Most of the cited cases supporting the theory of implied warranty of reasonable workmanship and habitability were factually concerned with structural defects rendering the home unfit for habitation.*fn15 In several cases, however, the implied warranty of habitability was found to have been breached not because of structural defects, but because of the unsuitable nature of the site selected for the home. See Mulhern v. Hederich, 163 Colo. 275, 430 P. 2d 469 (1967); Glisan v. Smolenske, supra; Waggoner v. Midwestern Development Co., supra; House v. Thornton, supra; Jennings v. Tavener  2 All. E.R. 769 (Q.B.).*fn16 This seems to be a natural
[ 447 Pa. Page 130]
application of the implied warranty of habitability of the home, since selection and subdivision of the home sites are within the exclusive domain of the buildervendors. The developer holds himself out, not only as a construction expert, but as one qualified to know what sorts of lots are suitable for the types of home to be constructed. Of the two parties to the transaction, the builder-vendor is manifestly in a better position than the normal vendee to guard against defects in the home site and if necessary to protect himself against potential but unknown defects in the projected home site.
While we can adopt no set standard for determining habitability, it goes without saying that a potable water supply is essential to any functional living unit; without drinkable water, the house cannot be used for the purpose intended. Accordingly, we find the implied warranty of habitability to have been breached by the appellee in the instant case.
We reverse the decree below and remand for further proceedings consistent with this opinion. Since the lower court did not reach the question of relief to be granted to the appellants, we express no opinion on that subject. Costs to be equally divided between the parties.
Concurring Opinion by Mr. Justice Eagen:
It was once well said that "law is the application of reason to human relations." This being so, then good law must be the application of right reason to
[ 447 Pa. Page 131]
human relations. Mr. Justice Pomeroy has performed this function admirably in this case. I wholeheartedly join in his opinion.