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Conway v. Cutler Group, Inc.

Supreme Court of Pennsylvania

August 18, 2014

MICHAEL AND DEBORAH CONWAY, H/W, Appellees
v.
THE CUTLER GROUP, INC. D/B/A THE DAVID CUTLER GROUP, INC., Appellant

Argued May 7, 2014

Appeal from the order of the Superior Court at No. 803 EDA 2012, dated November 5,2012, reversing and remanding the order of the Bucks County Court of Common Pleas, Civil Division, at No. 2011-05465, dated February 15, 2012. Trial Court Judge: Clyde W. Waite, Judge; Intermediate Court Judges: John L. Musmanno, Sallie Mundy, Judges; Stephen J. McEwen, Jr., President Judge Emeritus.

For The Cutler Group, Inc., d/b/a The David Cutler Group, Appellant: Bruce William Bellingham, Esq., Jennifer Myers Chalal, Esq., Paul R. Rosen, Esq., Spector Gadon & Rosen, P.C.

For Homebuilders Association of Chester and Delaware Counties, Appellant Amicus Curiae: Ronald M. Agulnick, Esq.

For Pennsylvania Builders Association, Appellant Amicus Curiae: Robert B. Hoffman, Esq., Eckert Seamans Cherin & Mellott, LLC.

Michael Conway and Deborah Conway, Appellee: Christopher Aloysius Bradley, Esq.; Steven Fisher Fairlie, Esq., Fairlie & Lippy, PC.

For Pennsylvania Association For Justice, Appellee Amicus Curiae: Paul Timothy Kelly, Esq., Mattise & Kelly, P.C.

BEFORE: MR. JUSTICE McCAFFERY. CASTILLE, C.J., SAYLOR, EAKIN, BAER, TODD, McCAFFERY, STEVENS, JJ. Mr. Chief Justice Castille, Messrs. Justice Saylor, Eakin and Baer, Madame Justice Toddand Mr. Justice Stevens join the opinion. Mr. Justice Baer files a concurring opinion in which Mr. Justice Stevens joins.

OPINION

Page 68

MR. McCAFFERY, JUSTICE

The issue presented in this case is whether a builder's implied warranty of habitability, which protects those who purchase a newly constructed home from latent defects, may also be invoked by subsequent purchasers of the home. We hold that a subsequent purchaser of a previously inhabited residence may not recover contract damages for breach of the builder's implied warranty of habitability.

In September 2003, The Cutler Group, Inc. (" Appellant" ) sold a new house in Bucks County to Davey and Holly Fields. After living in the house for three years, Mr. and Mrs. Fields sold the house to Michael and Deborah Conway (" Appellees" ). In 2008, Appellees discovered water infiltration around some of the windows in the home, and, after consultation with an engineering and architectural firm, concluded that the infiltration was caused by several construction defects. On June 20, 2011, Appellees filed a one-count complaint against Appellant, alleging that its manner of construction breached the home builders' implied warranty of habitability recognized by this Court in Elderkin v. Gaster, 447 Pa. 118, 288 A.2d 771, 777 (Pa. 1972).[1] Appellant filed preliminary objections in the nature of a demurrer, arguing, inter alia, that, as a matter of law, the warranty recognized in Elderkin extends from the builder only to the first purchaser of a newly constructed home because there is no contractual relationship between the builder and second or subsequent purchasers of the home. Recognizing that courts have traditionally required a showing of privity of contract before permitting a party to proceed with a warranty claim, the trial court concluded that the question presented was " one of policy as to who will bear the burden for damages caused by latent defects ... [in] relatively new residential dwellings." Trial

Page 69

Court Opinion, dated 4/18/12, at 6. The trial court sustained Appellant's preliminary objections on the ground of lack of privity between the parties, and dismissed Appellees' complaint with prejudice. Appellees appealed to the Superior Court.

In a unanimous, published opinion, the Superior Court reversed. Conway v. Cutler Group, Inc., 2012 PA Super. 242, 57 A.3d 155 (Pa.Super. 2012).[2] The Superior Court noted that the implied warranty of habitability is based on public policy considerations; is designed to equalize the disparate positions of the builder-vendor and the home purchaser; and exists independently of any representations of the builder, and even in the absence of an express contract between the builder and the purchaser. Id. at 158-59 (citations omitted). The Superior Court relied on its holding in Spivack v. Berks Ridge Corp., 402 Pa.Super. 73, 586 A.2d 402 (Pa.Super. 1990), a case in which the warranty of habitability was extended beyond the first purchaser, which was a property management company, to the first " user-purchaser." In addition, the Superior Court reviewed with approval the analysis of Kapetanovich v. Fox, 20 Pa. D& C.4th 316 (C.P. Allegheny 1993), in which the court of common pleas concluded that the policies underpinning the warranty applied notwithstanding the transfer of a parcel to another party: even where a home has been purchased by a subsequent owner, the bargain and price still reflect an inherent assumption that the home has no latent construction defects; any potential defects may as yet be undiscovered; and the builder is still best suited to resolve such defects. Determining that the policy considerations advanced by Appellees were persuasive and the rationale set forth in Spivack was compelling, the Superior Court held here that " the implied warranty of habitability extends to a second or subsequent purchaser of a home." Conway, supra ...


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