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Lehmann v. Arnold

OPINION FILED OCTOBER 7, 1985.

MARK A. LEHMANN ET AL., PLAINTIFFS-APPELLANTS,

v.

DAVID B. ARNOLD ET AL., DEFENDANTS (GENE BATEMAN ET AL., DEFENDANTS-APPELLEES).



Appeal from the Circuit Court of Piatt County; the Hon. William C. Calvin, Judge, presiding.

JUSTICE MCCULLOUGH DELIVERED THE OPINION OF THE COURT:

The plaintiffs, Mark and Julie Lehmann, brought this suit for damages caused by the periodic flooding of their home. Two counts were directed against Gene and Leslie Bateman, the developers of the subdivision in which the house lies. One count alleged a breach of an implied warranty of habitability, and the other asserted the Batemans had negligently failed to comply with section 13 of "An Act to revise the law in relation to recorders" (Ill. Rev. Stat. 1983, ch. 115, par. 13). The trial court granted the Batemans' motion for summary judgment on both counts. The plaintiffs also brought a negligence count and a breach of contract count against Bloomington Federal Savings & Loan (BFS&L), from which the plaintiffs had borrowed funds to purchase their home. They alleged BFS&L had failed to comply with provisions of the National Flood Insurance Act of 1968 (42 U.S.C. sec. 4001 et seq. (1982)) and a regulation enacted under it. The trial court granted BFS&L's motion to dismiss both counts.

The Batemans subdivided vacant property which they owned, and filed a plat of the subdivision on April 4, 1974, and again on June 3, 1977. They sold the unimproved land to David Arnold. Arnold built houses on the property, and in November 1978, he sold one of these houses to the plaintiffs. The plaintiffs secured a mortgage from BFS&L. As part of the loan process, BFS&L had the property appraised. The appraisal indicated that the land is located in a flood hazard area, but the plaintiffs were never informed of this.

Two creeks meet on the east side of the plaintiffs' land. When the plaintiffs bought the property, both creeks were dry. In March 1979, heavy rains caused the creeks to overflow their banks and surround the house with water. Between 12 and 19 inches of water seeped into the plaintiffs' basement. The flooding occurred again in the summer of 1979 and three times in 1981. The basement was unfinished when the plaintiffs purchased their home. They intended to build a bedroom, bathroom, and recreation room, and they had drywalled the basement. Due to the flooding, the basement was never finished. In addition, the flooding undermined the plaintiffs' driveway and sidewalk.

Following the flooding in 1981, the plaintiffs investigated the cause and discovered their house was located in a flood hazard area. On December 13, 1982, they filed suit against the Batemans, Arnold, BFS&L and Vail Moore, the surveyor who had subdivided the land for the Batemans. The plaintiffs sought recovery for the inhabitability of the basement, the damage to the drywall, sidewalk and driveway, and the decrease in the value of their home. The plaintiffs later amended their complaint to add the Piatt County recorder as a defendant. The counts brought against Arnold were dismissed after he was discharged in bankruptcy. The counts against Moore and the recorder were also dismissed, and this appeal does not concern them. The Batemans moved for summary judgment on the grounds that the implied warranty of habitability applied only to builder-vendors and that the plaintiffs sought recovery for economic loss in tort. The Batemans also maintained the plaintiffs had failed to bring suit within the applicable statute of limitations. BFS&L moved to dismiss, alleging that the Federal statutes and regulation did not create any duty on its part. The trial court granted both motions.

I

The Batemans contend the trial court properly granted summary judgment in their favor because the plaintiffs failed to bring suit within two years of the 1979 flooding. They argue the following statute applies:

"Actions based upon tort, contract or otherwise against any person for an act or omission of such person in the design, planning, supervision, observation or management of construction, or construction of an improvement to real property shall be commenced within 2 years from the time the person bringing an action, or his or her privity, knew or should reasonably have known of such act or omission." Ill. Rev. Stat. 1983, ch., 110, par. 13-214(a).

• 1 The Batemans maintain section 13-214(a) applies because the plaintiffs' complaint alleges that they negligently planned and designed the subdivision. In C.S. Johnson Co. v. Champaign National Bank (1984), 126 Ill. App.3d 508, 467 N.E.2d 363, we examined the legislative history of section 13-214(a) and determined it was enacted for the benefit of professionals associated with construction activities on real property such as architects, engineers, and contractors. The Batemans are not such professionals, and they have presented no evidence or argument that they, in fact, designed, planned, supervised, observed, or managed any construction on the property. As in C.S. Johnson, the mere allegation in the plaintiffs' complaint that the Batemans subdivided or developed the land is insufficient to render section 13-214(a) applicable.

II

The Batemans argue no implied warranty of habitability exists between a developer who provides unimproved land for construction of a new home and the purchaser of the home. Our supreme court first recognized an implied warranty of habitability for new homes in Petersen v. Hubschman Construction Co. (1979), 76 Ill.2d 31, 389 N.E.2d 1154. The court decided the purchaser generally cannot make a meaningful inspection of the home and, therefore, must rely on the skill and integrity of the builder-vendor. As a matter of public policy, the court decided the warranty extends to latent defects which interfere with the vendee's expectations that the house is reasonably suited for its intended use. 76 Ill.2d 31, 42, 389 N.E.2d 1154, 1158.

The plaintiffs assert the land, which the Batemans provided, is defective because their basement floods. They contend a defect in the land on which a house is built is no different than defects in other materials used in construction. They rely on Briarcliffe West Townhouse Owners Association v. Wiseman Construction Co. (1983), 118 Ill. App.3d 163, 454 N.E.2d 363. In Briarcliffe, a homeowners' association, which held title to common land in a planned unit development, brought an implied warranty action against the developer, who had sold townhouses to association members. The complaint alleged the developer had designed and fashioned the topography of the common land, but the land retained storm water resulting in serious damage. The court refused to accept the developer's argument that the warranty did not extend to vacant land. The court noted latent defects in the common land could affect the habitability of the townhouses. The court found no real distinction between defects in the buildings and defects in the land because in either case, the purchaser must rely on the expertise of the builder-vendor. 118 Ill. App.3d 163, 167, 454 N.E.2d 363, 365.

• 2 We agree that a builder-vendor who sells a new house and lot in a package sale should be liable not only for structural defects but also for the unsuitability of the site on which the house is built. (Hesson v. Walmsley Construction Co. (Fla App. 1982), 422 So.2d 943.) The plaintiffs ask us to extend liability on an implied warranty of habitability beyond the builder of a new home to one who sells the land to the builder. The Batemans maintain there should be no implied warranty associated with the sale of unimproved land. They cite Witty v. Schramm (1978), 62 Ill. App.3d 185, 379 N.E.2d 333, in which the plaintiffs purchased a vacant lot in a subdivision from the defendant. The plaintiffs, who had planned to build a home, excavated for a basement and encountered problems with subsurface waters. The court held there was no implied warranty of habitability applicable to the sale of unimproved land. The court reasoned that a seller of vacant land should not be placed in the position of having warranted to the buyers that they would be able to erect and maintain a home free from all problems.

In Kramp v. Showcase Builders (1981), 97 Ill. App.3d 17, 422 N.E.2d 958, new-home purchasers sued the developers of the subdivision as well as the builder for breach of the implied warranty of habitability. The plaintiffs alleged soil conditions in the subdivision were inadequate for installation and operation of their septic systems. The developers relied on Witty and argued there is no warranty of habitability for vacant land. The court decided Witty did not control its decision. The court believed the warranty did protect purchasers from defects arising out of soil conditions. The court, however, went on to note that no case had extended the warranty beyond the builder-vendor to vendee relationship. ...


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