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November 14, 1994


Appeal from the Circuit Court of Du Page County. No. 92-L-821. Honorable Robert K. Kilander, Judge, Presiding.

Rehearing Denied December 20, 1994.

Bowman, Woodward, Colwell

The opinion of the court was delivered by: Bowman

JUSTICE BOWMAN delivered the opinion of the court:

Plaintiffs, Michael and Jeri McClure, appeal from an order of the circuit court of Du Page County which dismissed count III of their first amended complaint on the ground that it failed to state a cause of action. Count III purported to allege a breach of the implied warranty of habitability on a residence plaintiffs purchased from the defendants, Robert and Nancy Sennstrom and Richard and Margaret Sigerich, who were doing business as S&S Partners. Plaintiffs claim the trial court erred in finding that the warranty was not applicable.

Plaintiffs entered into a real estate sales contract with the defendants for the purchase of a house located in Downers Grove. After closing on the property, the plaintiffs discovered a number of defects. They gave notice of these to the defendants, in accord with the terms of a one-year express warranty on the residence. When the defendants did not correct all of the claimed defects, plaintiffs filed a complaint which included count III, for breach of the implied warranty of habitability. Although defendants answered the complaint in part, they moved to dismiss count III pursuant to section 2-615 of the Code of Civil Procedure (735 ILCS 5/2-615 (West 1992)). The trial court granted the motion, finding that the facts alleged did not give rise to the implied warranty of habitability. Plaintiffs' motion to reconsider was denied, and this appeal followed.

Whether to grant or deny a section 2-615 motion is within the sound discretion of the trial court whose decision will not be disturbed absent an abuse of that discretion. ( La Salle National Trust, N.A. v. Village of Mettawa (1993), 249 Ill. App. 3d 550, 557, 186 Ill. Dec. 665, 616 N.E.2d 1297.) When deciding a section 2-615 motion, the trial court must take as true all well-pleaded facts set forth in the nonmovant's pleadings as well as the reasonable inferences to be drawn from those facts. ( Harris Trust & Savings Bank v. Donovan (1991), 145 Ill. 2d 166, 172, 163 Ill. Dec. 854, 582 N.E.2d 120.) A pleading should not be dismissed under section 2-615 unless it clearly appears that no set of facts can be proved which will entitle the pleader to relief. ( Faulkner v. Gilmore (1993), 251 Ill. App. 3d 34, 37, 190 Ill. Dec. 455, 621 N.E.2d 908.) Hence, plaintiffs' count III was properly dismissed only if its allegations demonstrated that plaintiffs could never prove the facts necessary to secure relief under an implied warranty of habitability.

The Illinois Supreme Court recognized an implied warranty of habitability which permits a purchaser to recover from a builder-seller for latent defects in a newly constructed home in Petersen v. Hubschman Construction Co. (1979), 76 Ill. 2d 31, 27 Ill. Dec. 746, 389 N.E.2d 1154. Accordingly, in their first amended complaint plaintiffs alleged, in relevant part, that the defendant partnership was engaged in the teardown of an old residence at a Downers Grove location, and the construction of a new residence at the same location; that they had entered into a real estate sales contract for the purchase of that residence from defendants; that the house which was the subject of the real estate contract was "a [sic ] older home which was torn down to the foundation and a new residence was build [sic ] by the defendants"; and that certain defects had revealed themselves in the completed residence.

In their motion to dismiss defendants contended that the house was partly new and partly old in that it included the foundation from an older home, and that the warranty was not implied with regard to such a structure. The trial court interpreted Petersen and its progeny to restrict the application of the implied warranty of habitability to "new " house construction. Then, specifically citing the language in the complaint that "an older home * * * was torn down to the foundation and a new residence was built," the court held that plaintiffs' allegation did not allege sufficient facts to make possible the application of the implied warranty. Plaintiffs' motion for reconsideration was denied, and the trial court found that there was no just reason to delay appeal of its finding, pursuant to Supreme Court Rule 304(a) (Official Reports Advance Sheet No. 26 (December 22, 1993), R. 304(a), eff. February 1, 1994). Whether the implied warranty of habitability applies to the facts of this case, where, except for its foundation, the house sold to plaintiffs by the builder-seller was entirely new, is a question of first impression.

The Petersen court explained that the implied warranty of habitability in cases involving the sale of new homes by a builder-vendor was a judicial innovation which was used, as a matter of public policy, to afford relief to new home buyers who discover latent defects in the home. It was meant to avoid the harshness of caveat emptor and the doctrine of merger, whereby all provisions of the contract of sale become merged in the deed and, absent reservations in the document itself, relief to the buyer is precluded after receipt of the deed. ( Petersen, 76 Ill. 2d at 38, 41.) Noting the nature of present day new home construction methods, the court remarked that the buyer, who is often making the largest single investment of his life, has little or no opportunity to inspect. He is usually not knowledgeable regarding construction matters and must rely significantly on the integrity and skill of the builder-seller, who is in the business of building and selling houses. ( Petersen, 76 Ill. 2d at 39-40.) Thus, the warranty was implied as an independent undertaking, rather than as a result of the execution of the deed, because of the "unusual dependent relationship of the vendee to the vendor." ( Petersen, 76 Ill. 2d at 41.) The court concluded that the buyer has a right to expect the benefit of his bargain, meaning a house that is reasonably fit for its intended use as a residence. Petersen, 76 Ill. 2d at 40, 41.

It is noteworthy that the Petersen court acknowledged, and rejected, authority holding that the warranty applies only when the house the plaintiff wishes to purchase is not completed at the time the contract is executed. Those cases reason that if the house is completed the buyer can thoroughly inspect it for defects before signing the contract. The Petersen court, however, indicated that generally it makes no difference whether the house is complete or incomplete. The latent defects would not be discoverable by a buyer in either case, and the buyer's reliance on the integrity and skill of the builder-vendor, therefore, would be the same in either case. Hence, the buyer should be permitted to recover for latent defects in either case. The builder-vendor is selling a house which he knows will be used as a home, and the buyer's expectation that the house will be reasonably suitable for that purpose is reasonable, regardless of its state of completion when the contract is signed. Petersen, 76 Ill. 2d at 40.

Since Petersen was decided, the warranty of habitability has been broadly applied to protect innocent home buyers. Observing that the purpose of the implied warranty is to provide just such protection, the court in Redarowicz v. Ohlendorf (1982), 92 Ill. 2d 171, 65 Ill. Dec. 411, 441 N.E.2d 324, extended the warranty to a subsequent purchaser where the original purchaser had resold the home within a relatively short period of time, and the latent defects manifested themselves within a reasonable time after the subsequent purchase of the house. Reciting the same limitations on the ability of a purchaser to discover defects that had been discussed in Petersen, the Redarowicz court reasoned in substantial part that the subsequent buyer, like the initial buyer, depended on the expertise of the builder. Similarly, in Tassan v. United Development Co. (1980), 88 Ill. App. 3d 581, 43 Ill. Dec. 769, 410 N.E.2d 902, the warranty was effective against the developer-seller of a condominium complex, even though the company did not build the condominiums, on the basis that the buyers depended on the developer to hire a competent contractor and had no control over the developer's choice. In Park v. Sohn (1982), 89 Ill. 2d 453, 60 Ill. Dec. 609, 433 N.E.2d 651, the court rejected the proposition that the warranty is implied only in sales by vendors who are mass producers of houses orfull-time professional builders and applied it to a part-time builder who had built only one house prior to the one involved in the case.

The warranty was also success fully invoked against a subcontractor of the builder-vendor in Minton v. The Richards Group (1983), 116 Ill. App. 3d 852, 72 Ill. Dec. 582, 452 N.E.2d 835, where the builder-vendor was dissolved and showed no assets. Agreeing with Redarowicz that the purpose of the implied warranty is to protect innocent purchasers, the court noted the buyer's dependence on the builder's ability to hire capable subcontractors and the lack of control over the builder's choice of subcontractor. In Hefler v. Wright (1984), 121 Ill. App. 3d 739, 77 Ill. Dec. 259, 460 N.E.2d 118, the defendant merely erected a house on land the plaintiffs already owned, and the packaged house had been manufactured by another company. Nevertheless, defendant was a builder-vendor because he was engaged in the commercial business of building houses and the buyers were dependent on him.

Several cases have also addressed the specific question of whether a residence is "new" within the meaning of the warranty. The Park court held a residence was new even though the defendants had lived in it for approximately two years before it was sold. The court reasoned that to hold the warranty inapplicable merely because the defendants had occupied it would provide builders with an easy way to avoid the warrant . ( Park, 89 Ill. 2d at 463.) Citing Park, and remarking that the purchaser who relied on the builder-vendor should not have to bear the responsibility for latent defects, the court in Cotter v. Parrish ...

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