GEORGE MILLER, ET AL V. DONNA HUTSON (D/B/A SCOTT PARTIN BUILDERS)
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2007-SC-000317-DG
GEORGE MILLER, ET AL.
V.
RENDERED : APRIL 23, 2009
TO BE PUBLISHED
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APPELLANTS
ON REVIEW FROM COURT OF APPEALS
CASE NO. 2005-CA-001049-MR
WHITLEY CIRCUIT COURT NO. 04-CI-00085
DONNA HUTSON
(D/B/A SCOTT PARTIN BUILDERS)
APPELLEE
OPINION OF THE COURT BY JUSTICE SCHRODER
REVERSING AND REMANDING
There are three issues in this construction-defects case : whether the
home builder exception to the doctrine of caveat emptor should be expanded to
include subdivision developers of market houses; whether the developer is also
the home builder; and whether the developer was also the warrantor. We need
not reach the first two issues in this case because we adjudge that Appellee
was the warrantor (or guarantor) on the subject property. Therefore summary
judgment for the Appellee was improper . We reverse and remand for further
proceedings consistent with this opinion.
pAbCA D.C .
As the developer of a residential subdivision, Donna Hutson contracted
with Scott Partin, a builder, I to construct for $62,783 a residence for sale2 on
her lot. 3 Although Scott Partin had done remodeling work in the past, this was
his first complete residential house . George and Geneva Miller were shown the
house by a realtor. The Millers made an offer and the negotiations began. The
agreed contract was for an $85,000 .00 purchase price, subject to the Millers
being able to obtain a VA4 fixed loan through Tri-County Mortgage Company,
Inc. (owned by Hutson) for $87,550 .00 . As part of the contract, the seller
agreed to install floating flooring (to be purchased by the buyer), and to seed
and landscape the yard.
Prior to closing, Hutson and the Millers completed a final inspection of
the premises . The inspection form was signed by Donna B . Hutson, as seller,
and George Miller and Geneva J. Miller, as buyers . In the final inspection
form, the seller agreed to the following repairs: "move gravel at driveway, . . .
water off - couldn't check, . . . builder will point out lot lines after close ."
In order for the VA to finance the home, it required a one-year general
warranty from the builder or from a warrantor. "Donna Hutson DBA Scott
Partin Builders" is listed as both the Builder and as the Warrantor in the VA
forms . Donna Hutson signed the Warranty of Completion of Constructions as
1 Partin testified the name of his company was "Scott's Home Improvement."
2 When a house is constructed for resale, and not for occupancy by the purchaser, the house is
commonly referred to as a "market house" or a "spec house."
3 Located in Biltmore Grove Estates in Whitley County, Kentucky.
4 Veterans Administration .
5 VA Form 26-1859.
Warrantor, warranting that the dwelling was constructed in substantial
conformity with the plans and specifications ; and warranting against defects in
equipment, material, or workmanship in the construction of said residence.
With the VA loan approved through Tri-County Mortgage Company, Inc.,
Hutson6 was able to and did convey the property to the Millers .
A few months after moving in, the Millers experienced a few problems .
The floating floors "bowed up," kitchen cabinets were "chewed up" and not
repaired, water was standing under the crawl space, water stains were on the
drywall, there were cracks around the ceilings and closet doors, and a number
of other items which were subsequently repaired by Partin. The Millers sued
Partin, Hutson, and Partin's father-in-law (he assisted Partin in building the
house) for the items not repaired. The trial court entered partial summary
judgment dismissing Hutson, finding that Hutson was the developer of the
subdivision, but not the "builder" of the house. The partial judgment was
made final and the Millers took their case against Hutson to the Court of
Appeals . In a split vote, the Court of Appeals affirmed the trial court's
dismissal, concluding partial summary judgment was proper, and the court
declined the invitation to extend the builder's exception? to the rule of caveat
emptor8 to include developers of residential subdivisions .
6 And her husband, Jimmy Vance.
7 Crawley v. Terhune, 437 S .W .2d 743, 745 (Ky. 1969) .
8
Buyer beware; see Craig v. Keene, 32 S.W.3d 90, 91 (Ky.App . 2000). See also Notice and
Opportunity to RepairAct, KRS 411 .250-411 .266 (applicable to claims commenced on or
after July 15, 2003).
Although this Court accepted discretionary review, we decline to consider
a further exception to the doctrine of caveat emptor for two reasons. First,
there is a serious issue of fact in this case as to whether the developer was also
the builder. "The standard of review on appeal of a summary judgment is
whether the trial court correctly found that there were no genuine issues as to
any material fact and that the moving party was entitled to judgment as a
matter of law[,}" 9 based on "the pleadings, depositions, answers to
interrogatories, stipulations, and admissions on file, together with the
affidavits, if any, . . . ."lo "The record must be viewed in a light most favorable
to the party opposing the motion for summary judgment and all doubts are to
be resolved in his favor."" Paintsville Hospital Company, 12 mandated that
summary judgment be granted only "where the movant shows that the adverse
party could not prevail under any circumstances ."
Although Hutson protested being considered the builder, Hutson
completed the VA form and listed herself as the builder, doing business as
Partin Builders . Hutson's deposition revealed she had a partner, although she
did not identify the partner. Hutson knew the VA would not approve the loan
unless the builder, or someone, warranted the building. Hutson did not sign
as agent or by power of attorney for Partin. She identified herself as the
builder (and warrantor) . In view of the conflicting evidence, there is an issue of
9 Scifres v. Kraft, 916 S.W.2d 779, 781 (Ky.App. 1996) .
to CR 56 .03.
11
12
Steelvest, Inc. v. Scansteel Serv. Qtr- Inc., 807 S.W.2d 476, 480 (Ky. 1991) (adopting
Paintsville Hosy . Co. v. Rose , 683 S.W.2d 255, 256 (Ky. 1985)) .
683 S.W.2d at 256 (citing Kaze v. Compton, 283 S.W.2d 204, 208 (Ky. 1955)) .
fact and of law as to whether Hutson was the builder or represented herself to
be the builder. Therefore, the trial court erred in granting partial summary
judgment to Hutson . 13
It is not necessary, however, to remand for further findings of fact (as to
whether Hutson was the builder) because Hutson also signed an expressed
written warranty covering the premises in question for one year . 14 Hutson
wanted to sell, the Millers wanted to buy - subject to obtaining a VA loan .
Hutson also wanted to finance through her mortgage company . The VA would
not authorize the loan unless the builder or someone else agreed to provide a
one-year warranty against defects in equipment, materials, or workmanship in
the construction of said residence. The VA requires that a "Warrantor" sign the
"Warranty of Completion of Construction ." 15 Without a Warrantor's signature,
neither the loan nor the sale could close. Hutson signed the warranty as
"Donna Hutson DBA Scott Partin Builders," not Partin Builders by Donna
Hutson, nor as power of attorney for Scott Partin .
Hutson now alleges that she did not intend to become the Warrantor, but
signed as an accommodation to Partin, the Millers, the VA, etc ., to close the
loan. She presented the trial court with parol evidence to contradict the
expressed written part of the warranty contract. That was error . KRS
371 .010(9) (statute of frauds) requires all contracts, and amendments thereto,
relating to real estate "be in writing and signed by the party to be charged
13
14
Steelvest, 807 S.W .2d at 480.
VA Form 26-1859.
15 Id.
therewith, or by his authorized agent ." Hutson, as "Warrantor," is a. guarantor
in her own separate contract of guaranty. As such, the guarantor's contract is
collateral to and independent of the original contract. 16
Hutson also asserts that even if she were a Warrantor (or guarantor), the
doctrine of merger would extinguish her liability when she signed the deed.
Hutson contracted to provide a one-year warranty on materials and
workmanship. The merger doctrine does generally hold "that all prior
statements and agreements, both written and oral, are merged into the deed . .
.
."17
However, there are exceptions - "fraud, mistake, or contractual
agreement[s] clearly not intended to be merged into the deed ."is
Harrodsburg_Industrial Warehousing, Inc. involved an escrow agreement
entered into by the parties to a deed in anticipation of an adverse ruling
concerning deed restrictions . The escrow agreement provided a future remedy
in the event that a pending action subjected the property to the restrictions .
While the circuit court did subject the property to the restrictions, our Court of
Appeals held the escrow agreement did not merge into the deed because "[t]he
clear language of the Escrow Agreement indicates that the parties intended this
agreement to survive the delivery and acceptance of the deed ." 19 Likewise in
our case, the one-year warranty was intended to survive the delivery and
16
17
See Citizens Fid. Bank 8v Trust Co. v. Lamar, 561 S.W.2d 326, 328 (Ky.App. 1977); see also
Enzweiler v. Peoples Deposit Bank of Burlington, Ky. , 742 S.W.2d 569, 571 (Ky.App. 1987)
(noting signing with a title and being personally obligated) .
Borden v. Litchford, 619 S.W.2d 715, 717 (Ky.App. 1981) .
18 Harrodsburg Indus. Warehousing, Inc. v. MIGS, LLC, 182 S .W.3d 529, 532 (Ky.App. 2005)
(citation omitted) .
19
Id.
acceptance of the deed, i .e . "This warranty shall continue for a period of one
year from the date of original conveyance of title to such Purchaser(s) or from
the date of full completion of each of any items completed after conveyance of
title." 2o
Because there is no issue of fact that Hutson was the Warrantor (or
guarantor) and there is no issue of law as to the liability of a guarantor, the
trial court erred not only in granting Hutson partial summary judgment, but in
not granting the Millers partial summary judgment. 21
Therefore, we reverse the Court of Appeals' decision and remand to the
trial court for the entry of a partial summary judgment against Hutson on the
issue of liability, and for further proceedings concerning damages.
All sitting. Minton, CJ. ; Abramson, Cunningham and Noble, JJ., concur.
Venters, J., concurs by separate opinion in which Scott, J., joins.
VENTERS, JUSTICE, CONCURRING : I concur with the decision of the
majority to reverse the summary judgment granted below, but I agree with
Chief Judge Combs, whose dissent in the Court of Appeals decision in this case
I find compelling . Judge Combs stated :
I can see absolutely no rational basis for our reluctance to
apply the Crawley exception to the doctrine of caveat emptor to
developer-sellers . Crawley crafted the exception to protect unwary
buyers of newly constructed houses from faulty construction and
20
21
VA Form 26-1859, p. 47 of the record, attached to the Appellant's response to the motion for
summary judgment . Also, Appendix C of Appellant's brief.
Steelvest, 807 S.W.2d at 480. See also Osborne v. Commonwealth , 185 S .W.3d 645, 650
(Ky. 2006); Storer Communications of Jefferson County, Inc. v. Oldham County Bd. of
Educ ., 850 S.W.2d 340, 342 (Ky.App . 1993)(regarding granting summary judgment to the
non-moving party) .
to extend to them warranties that houses would be constructed in
workmanlike fashion .
In this case, Hutson as developer-seller employed Partin to
construct a house for sale. She signed the Warranty of Completion
of Construction in such a manner as to indicate her participation,
association, and identity with Partin as builder: "Donna Hutson
DBA Scott Partin Builders ." The more reasonable and just result
would be for us to extend the Crawley exception to developersellers rather then restricting its applicability solely to buildersellers . The Georgia rule (Wash. Road Developers v. Weeks, 549
S . E.2d 416 (Ga. Ct. App. 2001)) is the better approach to this
issue, and I would urge that Kentucky follow the enlightened
example of many of our sister states to hold developer-sellers liable
for breach of warranties - at the very least, at the summary
judgment stage of litigation .
The purchase of a newly-built home is, for almost every Kentuckian, the
most significant financial decision they will make, and it is the fulfillment of a
significant part of the American dream . For the past forty years, since the
decision of our predecessor Court in Crawley v. Terhune , 437 S.W .2d 743 (Ky.
1969), we have consistently held that the doctrine of caveat emptor does not
protect the builder of a new residence from damages suffered as a result of
defective construction by the purchaser of the new residence . The developer of
a residential subdivision, who has contracted for and has overseen the
construction of the dwellings located thereon, and profited from the sale of
those residences, should not be insulated from liability. In many instances,
the developer chose the builder and controlled the quality of construction. All
too often, shoddy construction in a new residence is impossible to discover
because it is concealed within the walls of the dwelling and there is no prior
occupant to have discovered the defects. There is no reason to believe that
Appellee has not acted in the utmost good faith, and in fact by signing the
warranty, she exposed herself to potential liability other developers would have
avoided . But, it is all too easy for a developer to "contract" with barely-solvent
builders, take a profit from the sale of the residence, and leave the homeowner
saddled with a home that is not worth the amount owed on the mortgage and a
bankrupt, or near bankrupt builder from whom no damages can be recovered .
I would therefore hold that the developer-seller of property in a
residential subdivision is subject to the same implied warranties as the builder.
Scott, J ., joins.
COUNSEL FOR APPELLANTS :
David Ora Smith
Marcia A. Smith
208 Gordon Street
P.O. Box 699
Corbin, KY 40702
COUNSEL FOR APPELLEE:
Darrell L. Saunders
700 Master Street
P.O . Box 1324
Corbin, KY 40702
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