No. 485 April Term, 1977, Appeal from the January 12, 1977 Order of the Court of Common Pleas of Butler County, Civil Division, Law, at A.D. No. 76-534, Book 107, Page 344.
Michael J. Kearney, Jr., Braddock, with him Matthew L. Vadnal, Butler, for appellants.
No appearance entered nor brief submitted for appellee.
Watkins, President Judge, and Jacobs, Hoffman, Cercone, Price, Van der Voort and Spaeth, JJ. Van der Voort, J., joins this opinion as to Count I. Cercone, J., concurs in the result. Spaeth, J., files a concurring opinion. Price, J., files a dissenting opinion, in which Van der Voort, J., joins as to Count II. Watkins, former President Judge, did not participate in the consideration or decision of this case.
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In the present action, Appellants Lewis and Grace Fair appeal the decision of the Court of Common Pleas of Butler County sustaining the demurrers of Appellee Alexander Negley to both counts of appellants' complaint. In asking us to reverse the trial court, appellants seek an extension of our recent decision to abolish the common law doctrine of caveat emptor as it applies to residential leases and to apply an implied warranty of habitability to all such leases. Pugh v. Holmes, 253 Pa. Super. 76, 384 A.2d 1234 (1978). The two major issues raised by appellants are whether the implied warranty may be used as a basis for a complaint and whether the warranty may be waived by agreement of the parties to the residential lease. We hold that the implied warranty is a valid basis for a complaint and that the warranty may not be waived. Furthermore, we reverse the trial court's decision sustaining appellee's demurrer to the second count of appellants' complaint which alleged intentional infliction of emotional distress.
On March 12, 1974, appellants entered into a written rental agreement with appellee for a six room house in Butler, Pennsylvania. Appellants made rental payments of eighty dollars ($80.) per month until they vacated the premises in September, 1975. The clause in the agreement most at issue in this case stated that "premises taken in 'as is' condition, tenant knows the roof has a leak in the same, . . . ." Record at 10a and Appendix at 6.
Appellants filed a two count complaint against appellee. In the first count, they alleged that appellee breached the implied warranty of habitability on the rented premises;
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they sought reimbursement for all past rent paid ($1,560) and for excess water bills ($132) caused by appellee's failure to fix the defective water system. As examples of the alleged breach, appellants cited, inter alia, improper ventilation of a gas hot water heater and gas space heaters, lack of heat, falling plaster, defective electrical wiring, a malfunctioning water system, defective windows, broken porch steps and railings, and a leaking roof. Appellant's second count alleged that appellee had intentionally inflicted emotional distress upon them through his refusal to make the premises fit for human habitation; they sought $3,000 damages on the second count.
Appellee filed preliminary objections in the form of a demurrer to appellants' complaint. Argument was held on the demurrer and on January 12, 1977, Judge DILLON sustained appellee's demurrer and dismissed appellants' complaint with prejudice. This appeal followed.
We reverse the trial court's action in sustaining appellee's demurrer to the first count and reinstate appellants' complaint. In Pugh v. Holmes we held that the implied warranty of habitability may be used as the basis for a defense or for a counterclaim. Here, we hold that the warranty also may be used as the basis for a complaint. Just as with a counterclaim, standard contract remedies are available should appellants prove that appellee breached the implied warranty of habitability. For any time period during which the finder of fact determines that the premises were in an uninhabitable state, appellants may recover the difference between the amount of rent they paid and the reasonable rental value of the premises. Furthermore, they may recover any amount they spent on reasonable reparation and replacement in making the dwelling habitable. Finally, if the fact finder determines that their utility bills were excessive because of the uninhabitable condition of the premises, they may be reimbursed for the amount paid in excess of what their utility bills should have been had the premises been habitable. Of course, in order to succeed on their complaint, appellants must prove that they gave notice
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to appellee of the defective conditions, that appellee had a reasonable opportunity to correct the defects, and that he failed to do so. Pugh v. Holmes, 253 Pa. Super. at 88, 384 A.2d at 1241 and cases therein cited.
The major issue presented by this case is whether the implied warranty may be waived by agreement of the parties. In ruling on the "as is" clause in the lease the trial court adopted Section 2-316 of the Uniform Commercial Code and impliedly found that any warranty of habitability which may have existed had been waived. Act of April 6, 1953, P.L. 3, § 2-316 as reenacted by the Act of October 2, 1959, P.L. 1023, § 2, 12A P.S. § 2-316. That section states
[U]nless the circumstances indicate otherwise, all implied warranties are excluded by expressions like "as is", "with all faults" or other language which in common understanding calls the buyer's attention to the exclusion of warranties and makes plain that there is no implied warranty . . . .
12A P.S. § 2-316(3)(a). While we recognize that our decision in Pugh v. Holmes declared that all leases are to be treated as contracts and while we recognize the necessity and value of the freedom to contract between parties, we do not find this language from the Uniform Commercial Code, designed to regulate dealings concerning the sale of goods, controlling in the area of landlord tenant law.*fn1
Our initial decision to imply a warranty of habitability in residential leases was based primarily on four factors: the inability of tenants to adequately inspect or repair rental
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units, the disparity of bargaining power between landlord and tenant, the scarcity of housing in the Commonwealth, and the effect of uninhabitable dwellings on the public health and safety. We must now decide whether, despite the doctrine of freedom to contract, a waiver of the warranty would be so against public policy that it should not be permitted in residential leases.
Although "public policy" is a term which escapes easy definition, we agree with Comment (e) to Section 5.6 of the Restatement (Second) of Property which states that "An agreement or provision may be against public policy if it will materially and unreasonably obstruct achievement of a well defined . . . common law policy." The Restatement lists several factors to be considered in determining whether an agreement violates public policy. Upon consideration of those factors applicable to residential leases like the one here at issue, we hold that a waiver of the implied warranty of habitability does violate the public policy sought to be achieved by the warranty and that, therefore, the warranty may not be waived.
One factor is whether the agreement will be counter to statutory and regulatory provisions concerning public health and safety. As we noted in Pugh v. Holmes,
[A]t least one court has found that the continued letting of "tumbledown" houses is ". . . a contributing cause of such problems as urban blight, juvenile delinquency and high property taxes for conscientious landowners." Pines v. Perssion, 14 Wis.2d 590, 596, 111 N.W.2d 409, 413 (1961).
253 Pa. Super. at 84, 384 A.2d at 1239. Furthermore, appellants here attached as an exhibit to their complaint a "Notice of City Ordinance Violation" from the Housing Code Enforcement Office of Butler, Pennsylvania to appellee/landlord. The Notice listed seven (7) major defects in the rental premises found by the Code Enforcement Office and ordered to be remedied by appellee. Record at 12a. It is clear that if ...