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ARKANSAS LAW REVIEW


and
BAR ASSOCIATION JOURNAL
@

ARKANSAS

Volume 24

LAW REVIEW AND BAR ASSOCIATION

JOURNAL, INC.,

Fall, 1970

1970

Number 3

Quaere: Caveat Emptor or Caveat Venditor?


English Subtitle (Americanized):
A House Ain't Necessarily a Homel
Harold W. Young* and Loyd T. Harper"*
In a basic house and home dichotomy, a famous Madam
once expostulated, "A House Is Not A Home."'
In an equally basic-but substantially different-house and
home dichotomy, the majority of the Supreme Court of Arkansas,
by the most narrow margin possible (4-3), has just as boldly
and provocatively assessed the gap that separates a house from a
home in North Little Rock, Arkansas, and has announced to an
anxious legal and house building fraternity that the builder2
vendor must pay for bridging the gap. Wawak v. Stewart
answers affirmatively the question whether there is any implied
warranty in a contract by which the builder-vendor of a new
house sells it to its first purchaser. The majority of the court
sustained the trial court's theory of implied warranty and
awarded the buyer damages.
*

Associate Professor of Law, University of Arkansas at Fayette-

ville; Ford Foundation Urban Law Fellow, Columbia University School


of Law (1970-1971). A.B., 1948, West Virginia University; LL.B. with
honors, 1952, The University of Texas at Austin. Professor Young was
associated with the law firm of Baker, Botts, Shepherd & Coates in
Houston, Texas, from 1952 until 1969.
** Staff Member, ARKANSAS LAW REVIEW.
1. P. ADLER, A HOUSE Is NOT A HOME (1953).
2. 247 Ark. 1093, 449 S.W.2d 922 (1970). The opinion was de-

livered on February 2; rehearing was denied on March 9.

ARKANSAS LAW REVIEW

[Vol. 24:245

I
...the time has come, the walrus said,
to speak of many things .. 8

A wide-screen view from the top is one point from which to4
begin to understand, and to evaluate, the impact of Wawak.
Such a remote viewing point, as for example the roof of an adjacent multi-story building, would provide the vista of a subdivision of "Model Homes"-a neat and orderly arrangement of row
upon row of seemingly endless vari-colored roofs shielding the
latest advancements in family-style, packaged functionalism-a
serene suburbia-a work of studied spatial relationships. Any
resemblance at all to the licensed mayhem occurring on the freeway during the five o'clock crush?
Let us move our viewing point to a lower and closer angle.
The four following encapsulated close-ups, selected at randomas a series of poignant still-lifes-over the past dozen calendar
years would have revealed these happenings:
Vignette #1
a burn in the hand is worth ...
With a shriek of pain a small hand is jerked back from the
stream of liquified fire gushing from the bathroom sink faucet.
A sixteen-month old face reflects terrified wonderment at the
unexpected scalding from so usual a source of family cleansing.
For want of a $3.60 mixing valve .... 5
Vignette #2
of affluence and effluence
Like a latter day Mr. Blandings, 6 whose dream has assumed
nightmarish-like proportions, the new owner of the recently
constructed premises stands in the open door uttering a steady
stream of raw expletives-matching in content the stream of raw
sewage discharging onto the premises. If the expletive stream
seems without end, in all fairness, it should be noted that the
court itself characterized the flow of raw sewage as "a condi7
tion which stubbornly resists correction."

3. L.

CARROLL, ALICE'S ADVENTURES IN WONDERLAND

(1865).

4. The writers acknowledge considerable justified temerity in this


undertaking.
5. Cf. Schipper v. Levitt & Sons, Inc., 44 N.J. 70, 207 A.2d 314
(1965).
6. HODGKINS, MR. BLANDINGS BUILDS His DREAM HOUSE (1946).
7. Hoye v. Century Builders, Inc., 52 Wash. 2d 830, 329 P.2d 474
(1958).

1970]

CAVEAT EMPTOR OR CAVEAT VENDITOR

247

Vignette #3
a cold, cold hearth
In November 1959, as a result of the corrosion of the steel tubing,
the radiant heating system of the Kriegler home failed s In
the fading dusk of a November evening, packing boxes are
stacked on the lawn as the family stores its furniture in order
that emergency and final repairs may be made. Surely some
thankfulness exists that the locus is in the misty mildness of
Palo Alto, California, instead of in the brutally wintry blasts
of November in Butte, Montana. Just a temporary move to
alternate shelter-any jagged edges of children's emotions laid
bare by abrupt changes in home and school environment will,
like all things, improve with the passage of time. A bright and
shiny, newly painted outside hides the rust and corrosion buried
deep within the bowels of the slab foundation.
Vignette #4
April showers bring ....
Some months after the Stewarts moved into the house a serious
defect manifested itself, in that heavy rains caused water and
particles of fill to seep into the ducts and thence through the floor
vents into the interior of the house, with consequent damage...
to clean rug, to paint house (interior), to clean furniture, to replace lamp shades, to clean duct system, to replace draperies,
minor repairs and drain tile to correct leakage. 9
Who has produced these little scenes? Who has contributed time,

talent, money and effort toward the fashioning of materials and


labor into this structure called a house, and into the making of a
house into a home?
planner - designer - architect - engineer - surveyor - developer contractor - manufacturer - wholesaler - retailer - subcontractor
- laborer - appraiser - mortgage banker - lawyer - economist sociologist - psychologist - family

Who transforms the bundle of materials, labor, know-how and


construction, which a builder calls a house, into the emotionpacked shelter, which a family calls a home?1 What are the
"intentions of the parties"? A "meeting of the minds" may take
place in legal theory or legal concept, but is there really any
"meeting" between the builder's plans and intentions to achieve
8. Kriegler v. Eichler Homes, Inc., 74 Cal. Rptr. 749, 751 (1969).
9. Wawak v. Stewart, 247 Ark. 1093, 1094, 1101, 449 S.W.2d 922,
923, 926 (1970).
10.

As to house, cf.:

HOUSE & GARDEN, house of evil, HOUSE

housefly, housemaid's knee, house for sale, house of cards,


houseguest, house of glass, household, whorehouse, housekeeper, houseboat. Likewise, as to home, cf.: Home, Sweet, Home, homebrew,
home is where the heart is, home for Christmas, homeless, home is where
you hang your hat, homemaking, homecoming, My Old Kentucky Home,
homesick, homestead, Home on the Range, homemade, home rule,
home decoration.
BEAUTIFUL,

ARKANSAS LAW REVIEW

[Vol. 24:245

some degree of reasonableness in erecting a structure fit for


human habitation, on the one hand, and the buyer's desires and
sometimes unrealistic expectations of perfection in design and
function, on the other hand?
Viewed candidly, the trading, preceding that final moment
of selling and buying, takes place in an atmosphere much like
that which one would expect to find in a Jet Age Tower of
Babel"'-with the builder-vendor thinking and speaking in
"Buildereeze" and the buyer thinking and speaking in "Buyerease." The words spoken by each may sound alike, but the
unspoken meanings have little or nothing in common.
How can even an intelligent, educated, reasonably well-informed buyer, while personally inspecting the premises, realistically cope with the technical intricacies of water distributive
system mixing valves, 1 2 hydrostatic pressure capable of inundating the premises with raw sewage, 13 the uniform positioning
of steel tubes within double concrete slabs and moisture proof
membrane-protected single slabs,1 4 or subterranean ductwork
radiating from a metal chamber or plenum, which sits under the
heating and air-conditioning units? 15
When and against what perils should, or can, the buildervendor be insured in order to be protected from financial ruin?
What is the scope of the builder-vendor's liability, for either
personal injury or property damage, to the original or subsequent
purchasers or their lessees, sublessees, invitees, licensees, guests,
domestic help, etc., etc., etc., and what is the duration thereof?
When does personalty become a fixture? When is a fixture
not a fixture? Can a sale of personalty by sample be distinguished from a sale of realty by "Model Home"? How much
historical drag can a technically-oriented society afford? Should
there be warranty-filled transactions in sales of personalty, 16
11. HOLY

BIBLE,

Genesis 11: 9. "Therefore is the name of it called

Babel; because the Lord did there confound the language of all the

earth; and from thence did the Lord scatter them abroad upon the face
of all the earth."
12. Schipper v. Levitt & Sons, Inc., 44 N.J. 70, 207 A.2d 314 (1965).
13.

Hoye v. Century Builders, Inc., 52 Wash. 2d 830, 329 P.2d 474

(1958).
14. Kriegler v. Eichler Homes, Inc., 74 Cal. Rptr. 749 (1969).
15. Wawak v. Stewart, 247 Ark. 1093, 449 S.W.2d 922 (1970).
16. See dissenting opinion of Justice Byrd in Wawak v. Stewart,
247 Ark. 1093, 1114, 449 S.W.2d 922, 933 (1970).

"The personal property

warranties, including those involved in the purchase of a shoe string,


have been the subject of much thought before legislation regulating the
same was enacted, see Uniform Sales Act and the Uniform Commercial
Code, Act 185 of 1961."

1970]

CAVEAT EMPTOR OR CAVEAT VENDITOR

and concurrently therewith


shrouded sales of realty?

ghost-like

249

caveat emptor 17 en-

How Is A COURT TO HOLD?


Out of this morass of men, materials and imagination a court
must seek to fashion a rational decision based on legally sufficient
distinctions meaningful in today's society.
Several courts, like grasping the handle of a swift and shining
new Excalibur,18 have taken a bold grip on the doctrine of
strict liability arising out of implied warranty, and with it have
begun to cut a mighty swath across Whiteacre, Blackacre and
Grayacre. The majority of the Arkansas Court has commendably
slashed away and, thereby, has joined the front ranks of that
growing vanguard of jurisdictions affording protection to the
recently beleaguered home buyer. Momentarily, at least, out of
step and stumbling along in the rear ranks is the presently beleaguered house builder-vendor.
A short backward look may accommodate an understanding
of forward thinking.

A DREARY BIT OF LOGIC-ENGLISH STYLE


Like so much of the property law of Arkanas, 9 Wawak
has its roots in England. In 1931 the decision in Miller v. Cannon
Hill Estates, Ltd. 20 drew a sharp distinction between the implied
warranty rights of a buyer who signed a contract to purchase
with a builder-vendor during the course of construction of the
17. In order to unwrap some of the shrouds, see Hamilton, The
Ancient Maxim Caveat Emptor, 40 YALE L.J. 1133 (1931).
18. By the middle 1960's the courts found themselves in the uncomfortable position of being between a rock and a hard place as they
faced questions of varying types and degrees of buyer protection at a
time when 500,000 to 750,000 housing units were being completed annually. Sheer weight of numbers required a somewhat faster than

usual cutting of the legal underbrush. The analogy to Sir Thomas


Mallory's MORTE D'ARTHUR (1485) seems a fair one. See Rsiss, SiR
THOMAS

MALLORY

37 (1966).

"The action centers around a magical

sword that can be removed from a rock only by the chosen king."
See also Id. at 185 for a bit of ancient backlash. "He began his reign
drawing a sword from a rock; he ends with his sword returning to a
world beyond the human. Like the Grail, this talisman is taken away
from an imperfect world."
19. See Wright, Medieval Law in the Age of Space: Some "Rules
of Property"in Arkansas, 22 ARx. L. REv. 248 (1968).
20. [1931] 2 K.B. 113.

ARKANSAS LAW REVIEW

[Vol. 24: 245

house and those of a buyer who signs such a contract after the
completion of construction. In holding for the buyer who
contracts during the course of construction the court painstakingly attempted to distinguish the result it reached from the
result which it would have reached if the contracting had taken
place after the completion of construction. This latter dictum,
and the before and after completion test which it fathered,
proved to be a substantial stumbling block during the next 30plus years for those buyers in the United States who sought to
recover from a builder-vendor on a theory of implied warranty.
This particular bit of gratuitous jurisprudence has been doubly
bitter to lawyers for American home buyers because of the
fuzziness with which the court handled some oral representations to the effect that "materials and workmanship are of the
best" and the failure of the court to state precisely the extent
to which such representations provided the basis for an express
warranty. The opinion supports an analysis that the court actually found an express warranty, 21 and renders questionable
the necessity for the dicta relating to implied warranty except
as an alternative theory of recovery or judicial makeweight.
The laboriously futile effort of the English Court to distinguish realistically an unfinished house from a finished house
even during the 1930's in England, which effort falls far short
of the mark, is in almost direct contrast to the relative ease
with which the Arkansas Court found in the 1960's ". . . an implied warranty-of inhabitability, sound workmanship, or proper
construction . . .*22 in the sale of a new house 23 by a vendor,
who also built the structure. A brief but incisive dissection of
the English Court's reasoning serves both as a measure of the
ocean of difference separating England in the 1930's from one
of the 48 continental United States in the 1960's and as a
vehicle for questioning the logic of such reasoning for even
such a remote time2 4 as the Dark Ages of the thirties in England.
The English Court reasoned that caveat emptor properly
21. Bearman, Caveat Emptor in Sales of Realty-Recent Assaults
Upon the Rule, 14 VAND. L. REv. 541, (1961).
22. Wawak v. Stewart, 247 Ark. 1093, 1095, 449 S.W.2d 922, 923
(1970).
23. The term "new house" as used by the majority of the Arkansas
Court is understood to be synonomous with the terms "completed house"
or "finished house" for the purposes of the before and after completion
dichotomy.
24. The question might be posed this way, "How many light years
are the equivalent of the 30-plus calendar years intervening between
1931 and the mid-1960's?

1970]

CAVEAT EMPTOR OR CAVEAT VENDITOR

251

applied to the sale of a finished house, first, because the buyer of


such a house could, by an examination or inspection of the
premises after the completion of construction, discover defects
therein, and, second, that a buyer of a finished house might not
want it for a dwelling place but might want to tear it down and
use the land as a site on which to rebuild. On the other hand,
said the court, a buyer who contracts during the course of construction has no opportunity to examine or inspect the house as
it stands in its finished state (the VA and FHA had not yet
come up with periodic inspections during the course of construction). Further, said the court, it was clear that one who contracted to purchase during the course of construction clearly intended to live in it when completed. For these reasons, the
court decided there should be warranties of fitness for habitation
and of good structural quality implied in the contract of sale.
It seems necessary only to make two points. The court's
reasoning was promptly criticized by another court in its own
jurisdiction,2 5 and has been criticized by at least one commentator
and one court in the United States.2 6 It is, of course, not possible to inspect or examine a sewage system buried beneath the
earth, nor pipes placed within a single or double slab of concrete, nor ductwork lying beneath a concrete floor. It is, per25. The first crack in Miller's foundation developed only six years
after its completion. See Perry v. Sharon Dev. Co., [1937] 4 All E.R.
390 (C.A.) where the court's problem was in determining whether a
house which lacked only decoration, water taps, bath, grates, and plaster
was in a finished or unfinished state for the application of the Miller
test. The court found the house to be unfinished and held for the buyer.
After considering Miller and Perry one commentator was moved
to observe, "In the instance of the sale of an unfinished home the
builder-vendor had become so much of a 'builder' that he lost the usual
vendor's protection of caveat emptor." Roberts, The Case of the Unwary
Home Buyer: The Housing Merchant Did It, 52 CORNELL L.Q. 835, 838
(1967).

This is bothersome. How does one who has less than completed a
house become more of a builder than one who has completed the house?
-by what measure or yardstick west of Chinese metaphysics is this
susceptible to testing? Like many lawyers, a builder-vendor wears
two hats. This is hat splitting.
26. See Bearman, supra note 21, at 545-46, which concludes, "The
outcome is anomalous: the vendee who purchases his home one day
before completion receives an implied warranty that his house is free
from structural defects, while his neighbor, who by chance signed his

contract the next day, buys without the implied warranty."


See also Humber v. Morton, 426 S.W.2d 554, 561 (Tex. 1968) where
the Supreme Court of Texas stated: "Obviously, the ordinary purchaser
is not in a position to ascertain when there is a defect in the chimney
flue, or vent of a heating apparatus, or whether the plumbing work
covered by a concrete slab foundation is faulty."

ARKANSAS LAW REVIEW

[Vol. 24:245

haps, not surprising that the dissenting opinion in Wawak makes


no reference to Miller v. Cannon Hill Estates, Ltd.
III
and case by case the law shall grow...
The majority opinion in Wawak states that in the 1960's
six states recognized some type of implied warranty in the sale
of new houses by builder-vendors. 27 The opinion refers to
cases arising in Colorado, Idaho, New Jersey, South Dakota,
Texas and Washington. It is then pertinent to analyze and, to
the extent possible, synthesize these cases on which the majority
relied as a foundation for Wawak. By way of backing and filling
a little, passing mention should first be made of the manner in
which the implied-warranty-for-an-unfinished-house holding in
Miller v. Cannon Hill Estates, Ltd. came to these shores and the
somewhat curious boost its advent in American jurisprudence
gave to smoothing the ground for the complete rejection of its
attempted unfinished (before) and finished (after) dichotomy.
Without much more ado than should be accorded a defective
sewer line and a flooded basement, in 1957 the Supreme Court of
Ohio applied the Miller holding in an unfinished house case. 28
The first important reliance on Miller occurred one year
later, in 1958, when the Supreme Court of Washington handed
29
down its decision in Hoye v. Century Builders, Inc.
Hoye has several areas of noteworthy importance. One such
area is the time at which the builder-vendor and house buyer
relationship was created. Buyer (husband and wife) made an
on site visit to a subdivision, and, while accompanied by a salesman of the builder-vendor, selected a lot, chose a set of plans
from among several offered by the salesman, and contracted to
buy the lot upon which builder-vendor agreed to construct a
house according to the chosen plans. It is important to recognize
that the contract was signed before the commencement of construction, thus adding a third time dimension to Miller's before
and after completion time periods. The writers of this article feel
that the time factor has been in the past, and will prove to be in
the future, the most important single factor in determining the
27.
(1970).

Wawak v. Stewart, 247 Ark. 1093, 1095, 449 S.W.2d 922, 923

29.
(1958).

Hoye v. Century 'Builders, Inc., 52 Wash. 2d 830, 329 P.2d 474


See Note, 34 WASH. L. REv. 171 (1959).

28. Vanderschrier v. Aaron, 103 Ohio App. 340, 140 N.E.2d 819
(1957).

1970]

CAVEAT EMPTOR OR CAVEAT VENDITOR

253

outcome of cases involving the scope and duration of a buildervendor's liability on an implied warranty theory. Miller and
Hoye together estabish three time periods to which the creation
of the vendor-builder and house buyer relationship may be related. For the purposes of this article these time periods will be
designated: Period I-covering the time period before the commencement of construction; Period I-covering the time period
between the commencement of construction and the completion
of construction, i.e., during the course of construction; and
Period III-covering the time period after the completion of construction, i.e., the "new house" time period, as the writers understand such term to be used in Wawak and in those cases on which
it is bottomed. Hoye, then, is a Period I case in which the buyer
prevailed on a theory of implied warranty of habitability involving, for all intents and purposes, a custom-built house.30
Another area of importance for Hoye arises out of its being
the first in a trilogy of Washington cases decided within a span
of only 11 years and involving successively Period I, Period II
and Period III cases. The Period II case, Fain v. Nelson,3 1 decided in 1960, held against the buyer on the basis that a defective
but reparable roof did not render the house unfit for its intended
purpose and did not amount to a breach of the implied warranty.
The Period III case, House v. Thornton, 32 decided in 1969, (the
sixth case referred to in the Wawak majority opinion as a recent
decision illustrating "what seems certain to be the accepted rule
of the future") 33 held for the buyer after the basement, walls,
floors and foundation of the house cracked and slipped and the
supporting terrain slid away from the foundation, with the
court stating:
We apprehend it to be the rule that, when a vendor-builder sells
a new house to its first intended occupant, he impliedly war-

30. A custom-built house would be the anticipated result in a


Period I case. The motivation to contract with reference to an individually selected lot and a hand-picked floor plan would insure
some customizing in the final result. Except for the elimination of a
buyer-employed architect, the Hoye process of lot and plan selection
approaches the new house buying process typical before World War II
when there was generally a long term and highly personalized relation-

ship between the builder and the buyer. With the passage of the years
since the end of World War II and the consequent increase in mobility, there has been a commensurate decrease in house buying permanency and a drastic shortening or eliminating of the former builder
and buyer relationship.
31. 57 Wash. 2d 217, 356 P.2d 302 (1960).
32. - Wash. -, 457 P.2d 199 (1969).

33. Wawak v. Stewart, 247 Ark. 1093, 1096, 449 S.W.2d 922, 924
(1970).

ARKANSAS LAW REVIEW

[Vol. 24:245

rants that the foundations supporting it are firm and secure


safe for the buyer's intended
and that the house is structurally
34
purpose of living in it.
The court also stated, "...
the old rule of caveat emptor has
little relevance to the sale of a brand-new house by a vendorbuilder to a first buyer for purposes of occupancy. '35 It is singularly interesting to contrast such statement with the Hoye opinion where the Washington Court just 11 years earlier assumed,
without so holding, "... that the doctrine of caveat emptor applies to sales of real property and that if the case presented the
sale of a new, but nevertheless completed house, there would
be no implied warranty of fitness."36
The last area of Hoye's importance lies in the subject matter
of the house defect. The possible relationship of such subject
matter with the outcome of the case should not be overlooked.
The court was faced with balancing a stubbornly persistent discharge of raw sewage against the question of fitness for human
37
habitation. The buyer won.
Period II cases probably should be looked at, in a glancing
sort of way, in order to obtain a proper perspective and as prelude for looking at the Period III cases referred to in Wawak.
In 1957, in Gilbert Construction Company v. Gross38 the Maryland Court could find no implied warranty arising out of a contract which provided that work should be performed in a workmanlike manner, although it appears that the gap which the
court could not bridge was that between questionably satisfactory installation of heating equipment on the one hand and unsatisfactory heating of the house on the other. The court seemed
troubled by the apparent unsuitable nature of the heating equipment for the house in question, regardless of the workmanlike
installation of the equipment, but again could find no evidence
as to what damages had been incurred as a result of faulty installation. A 1958 Illinois appellate court decision, Weck v. A:M
34. House v. Thornton, - Wash. -, 457 P.2d 199, 204 (1969).
35. Id. at 204.
36. Hoye v. Century Builders, Inc., 52 Wash. 2d 830, -, 329 P.2d
474, 476 (1958) (emphasis added). The Court based its assumption on
Note, Right of Purchaser in Sale of Defective House, 4 WEST. RES. L.
REv. 357 (1953). One who watches television at all would feel strongly
moved to at least hum, "You've come a long way, baby. ..

."

37. Thus, Miller was introduced into the United States against a

backdrop of a busted sewer and a never-ending discharge of raw sewage.


What of the builder-vendor who was heard to mutter, "Dirty (bad)

cases make hard law?"


38. 212 Md. 402, 129 A.2d 518 (1957).

1970]

CAVEAT EMPTOR OR CAVEAT VENDITOR

255

Sunrise Construction Co.,3 9 points up the degree to which improbable activity in the courthouse was beginning to take place
as a result of the Miller before and after completion test. Buyer
was stoutly contending that the purchase was of an unfinished
house, that was what the parties intended to buy and sell and,
hence, implied warranty protection was available. Builder-vendor just as stoutly held out for a finished house sale to escape
over the before and after line of demarcation. 40 The court held
for Buyer as to defects in the house, but declared that any agreement relating to a phantom-like driveway was merged into the
deed. -We shall have more about merger later. An Oklahoma
case 4 1 and a Colorado case, 4 2 both of the Period II type, came
along in 1963 without adding much of anything new, except that
the latter of the two undoubtedly paved the way for the first
important Period III case at which we shall be looking.
Carpenter v. Donohoe 43 was decided by the Colorado Supreme Court in 1964 as the first application of implied warranty
protection extended to the buyer of a finished house. While not
so likely to offend the senses of the court as defective sewer systems or discharges of raw sewage, there was a very real question
as to the physical inhabitability of the house as a result of a
jack-straw like shoring-up of the premises occasioned by caving
in basement walls. As was to be expected for the then present
state of jurisprudence, the buyer relied on the one hand on the
existence of known-but-hidden defects of a dangerous nature
and alternatively on the theory of implied warranty-even
though the contracting was done after the completion of construction. In remanding the matter on both theories, the court held
that there is an implied warranty in the agreement between a
builder-vendor and a buyer involving a newly constructed house
(although complete at the time of contracting) that the house was
built in a workmanlike manner and is suitable for habitation.
Next, in order of chronology, came Schipper v. Levitt &
Sons.44 The foundation-like position of this case and its tran39.

36 Ill. App. 2d 383, 184 N.E.2d 728 (1962).

40. One can scarcely imagine with any reality the aftermath of an
automobile showroom drama where the new car buyer, on the one
hand, would stoutly contend that he had knowingly purchased a less
than complete car, while the seller, on the other hand, would just as
vehemently insist that he had sold the car as a completed unit while

knowing that it was short of brakes and a gasoline tank.


41.
42.
43.

Jones v. Gatewood, 381 P.2d 158 (Okla. 1963).


Glisan v. Smolenske, 153 Colo. 274, 387 P.2d 260 (1963).
154 Colo. 78, 388 P.2d 399 (1964).

44. Schipper v. Levitt & Sons, Inc., 44 N.J. 70, 207 A.2d 314 (1965).

ARKANSAS LAW REVIEW

[Vol. 24:245

scendent importance to the development of the theory of implied warranty liability in new housing place it in line for special treatment. Such treatment will be accorded it in the next
section. It should suffice at this point to say that the case would
fit the Period III type, or perhaps, more accurately a Period IIIplus type.
45
In 1966 the Idaho Court decided Bethlahmy v. Bechtel.
It is difficult to say whether this case should be considered as a
Period II or Period III type of case. Factually an unfinished
house was contracted for by a buyer who, after the house was
finished, was unable to tolerate water flooding across the tiled
floors of basement rooms to the extent that furniture had to be
placed upon bricks to avoid serious water damage. Buyer moved
out and went to trial on a known-but-hidden-defect theory which
failed. The trial court found there were no implied warranties
in sales of real estate, from which finding no assignment of error
was taken. After upholding the trial court's finding as to no
concealment on the part of the builder, the Idaho Court decided
that the case demanded the invocation of implied warranty
liability on the part of the builder on the basis of the trend
toward such liability evidenced by cases involving builder-vendors of new houses. Perhaps, the most notable feature of the
case lies in the observation of the degree to which violence is
done to legal niceties when a fact situation is so socially offensive that the court manifests a compulsion to reach a socially
desirable result with little attention being devoted to the means
used to reach the desired end. Secondarily, the case announces,
by way of an attempted delimiting of the liability of the builder
that,
The implied warranty of fitness does not impose upon the builder
an obligation to deliver a perfect house. No house is built without defects, and defects susceptible of remedy ordinarily would
not warrant rescission. But major defects which render the
house unfit for habitation, and which are not readily
remedi46
able, entitle the buyer to rescission and restitution.
Thus, the upper limit of liability is something less than perfection. How much less appears to be an open question.
Waggoner v. Midwestern Development Co., 47 decided by the
South Dakota Court in 1967, involved a PeriodIII type house and
contains the important holding that the implied warranty survives the delivery of the deed. The scope of this writing will not
45. 91 Idaho 55, 415 P.2d 698 (1966).
46. Id. at 711.
47. 83 S.D. 57, 154 N.W.2d 803 (1967).

1970]

CAVEAT EMPTOR OR CAVEAT VENDITOR

257

permit anything more than passing mention of the merger doctrine.48 The majority of the Arkansas Court in Wawak gave
it short shrift by stating,
Even if we assume that the preliminary contract was not merged
in the warranty deed, we think it plain that the quoted paragraph did not exclude an implied warranty with respect to
the particular defect now in question, which lay beneath the concrete floor and could
not have been discovered by even the most
49
careful inspection.

This reverse twist from the traditional and orthodox handling of


the merger doctrine is another illustration of the degree to which
the courts ride rough shod over conventionalities when the socially desired result seems very clear. The Michigan Court in
1953 resolved the merger question satisfactorily by finding two
separable covenants-one, to construct the house in conformity
with local and state building codes and to the satisfaction of the
Federal Housing Authority, and, second, to convey the premises
to the buyer by a general warranty deed.50
In 1968 the Supreme Court of Texas decided the case of
Humber v. Morton,5 1 a Period III case involving a defectively
constructed chimney. The court's opinion contains a succinct
expression of the underlying rationale of the recent cases which
have considered the duty of the builder-vendor to the new house
buyer and thereby offers an explanation of the diminishing
viability of the caveat emptor concept. The court said:
If at one time in Texas the rule of caveat emptor had application to the sale of a new house by a vendor-builder, that time
is now past. The decisions and legal writings herein referred to

48. Arkansas has in the past followed the orthodox view and has
applied the traditional doctrine of merger in cases where the promise
being sued on was directly related to transfer of title, as opposed to a
promise collateral to or independent of transfer of title. See Duncan
v. McAdams, 222 Ark. 143, 257 S.W.2d 568 (1953) and Mills v. Deniston, 227 Ark. 463, 299 S.W.2d 195 (1957) for decisions holding that a
contract for the sale of land in Arkansas and all prior negotiations
with respect thereto are deemed to be merged into the deed subsequently executed pursuant to the terms of the contract or prior negotiations.
49. Wawak v. Stewart, 247 Ark. 1093, 1101, 449 S.W.2d 922, 926
(1970). "The quoted paragraph" refers to the following provision contained in the offer-and-acceptance agreement that preceded the execution of a warranty deed when the sale was consummated:
Buyer certifies that he has inspected the property and he is not
relying upon any warranties, representations or statements of
the Agent or Seller as to age or physical condition of the
premises.
50. Allen v. Currie Lumber Co., 337 Mich. 696, 61 N.W.2d 138
(1953).
51. 426 S.W.2d 554 (Tex. 1968).

ARKANSAS LAW REVIEW

[Vol. 24: 245

afford numerous examples and situations illustrating the harshness and injustice of the rule when applied to the sale of new
houses by a builder-vendor .....
.The caveat emptor rule as
applied to new houses is an anachronism patently out of harmony with modern home buying practices. It does a disservice
not only to the ordinary prudent purchaser but to the industry
itself by lending encouragement to the unscruplous,
fly-by-night
52
operator and purveyor of shoddy work.
Such, then, are the underpinnings of the six cases relied on by
the majority of the Arkansas Court. 53 It seems only appropriate
to suggest that these "new trend" cases uniformly represent a
departure from the traditional and conventional foundations of
legal decisions and, like a harbinger of things to come, portend a
cantilever-like structuring of judicial opinions-a thrusting out,
where the anchor points and stress lines are more horizontal
(social) than vertical (stare decisis), and the support for the entire structure is more sophisticated and, hence, less superficially
apparent.
IV
. . Jfrom sea to shining sea...
The original drawing board for these newly structured judicial decisions was Schipper v. Levitt & Sons. 54 Vignette #1,
supra, sufficiently describes in a nutshell-sort of approach the
conscience-wrenching proportions of the fact situation presented
to the New Jersey Supreme Court. With that special visual
acuity which comes with hindsight, it is clearly and readily apparent that builder-vendor Levitt suffered from extreme lack
of foresight on two counts. First, printed handbooks and instructions which might be read and understood by older children
and adults can neither be read nor understood by infants and
small children. Second, the wholesale price of the missing mixing
valve was testified to be about $3.60. It is singularly interesting
to note that Levitt's great success with mass produced housing is
based on the principle of economies of scale 5 and that the application of such principle to the already low cost wholesale price
of the mixing valve would have further reduced the cost to a
minimal level. It is also singularly interesting to note further
52.

Id. at 561-62.

53. In addition to the five cases discussed in sequence immediately


supra, the reader is referred to House v. Thornton, - Wash. -, 457
P.2d 199 (1969).
54. Schipper v. Levitt & Sons, Inc., 44 N.J. 70, 207 A.2d 314 (1965).

55. G. LEFCOE, LAND DEVELOPMENT LAW 291-97 (1966) quoting from


The Levitts and Their Towns, RACHLIS & MARQUUSEE, THE LANDLORDS
228-31, 233, 236-40, 242-43, 243-45 (1963).

CAVEAT EMPTOR OR CAVEAT VENDITOR

1970]

259

that Levitt's failure to apply economies of scale to small items,


such as mixing valves, resulted in a vast quantum of exposure
which is presently not susceptible to even an approximate estimate. By way of explanation, if not justification, of Levitt's
failure to apply economies of scale consistently, it seems only
fair to observe that a corollary of the principle of economies of
scale is the questionable maxim that the highest and best use to
which land may be put is that use which produces the greatest
dollar return per square inch. It does appear that Levitt was
consistent in applying both the principle and the corollary
thereto in so far as the underlying motivation for both is concerned. To strike the economies of scale chord one more time,
and to use it as a basis of summarizing, it may be said fairly
that economies of scale made possible the assembly line technique
first developed by the automobile industry and that Levitt borrowed it from Detroit in order to achieve mass production of
houses. And to a considerable measure, it was the analogy between mass produced automobiles and mass produced houses
which caused the New Jersey Court to cross over the
bridge which had theretofore existed between products liability
cases based on tort, on the one hand, and implied warranty
cases based on contract on the other. The Court said, "We consider that there are no meaningful distinctions between Levitt's
mass production and sale of homes and the mass production and
sale of automobiles and that the pertinent overriding policy
considerationsare the same."56
Thus, Schipper played a leading role in the development of
this socio-legal drama peculiar to today's world. The New Jersey
Court actually amalgamated strict products liability with implied
warranty liability of a builder-vendor of new housing for personal injuries resulting from a dangerously designed and installed hot water system. The Court accomplished this result
through the medium of the holding that Levitt was liable on
either the theory of warranty or strict liability upon proof that
the design of such system was unreasonably dangerous and
proximately caused the personal injuries. The relative ease with
which the majority of the Arkansas Court found for a buyer
claiming only property damages is directly traceable to Schipper's
57
Simamalgamation of products liability and implied warranty.
56.

Schipper v. Levitt & Sons, Inc., 44 N.J. 70, -,

325 (1965)

57.

207 A.2d 314,

(emphasis added).

See Levy v. C. Young Construction Co., 46 N.J. Super. 293,

134 A.2d 717 (1957),

aff'd 26 N.J. 330, 139 A.2d 738 (1958), and read

ARKANSAS LAW REVIEW

[Vol. 24:245

ilarly traceable is its observation that, "Both the rapidity and


the unanimity with which the courts have recently moved away
from the harsh doctrine of caveat emptor in the sale of new
houses are amazing, for the law has not traditionally progressed
with such speed."58
Schipper was earlier herein referred to as a Period III-plus
case. The plus refers to the damage claimant's being not the
buyer from the builder-vendor, but a lessee of the buyer, thus
extending the implied warranty protection beyond the first purchaser from the builder-vendor in much the same way that
products liability has been extended beyond the first purchaser.
This question is not involved in Wawak and will be put to rest
at this point, to be raised again at the appropriate point infra
where an effort will be made to gauge, at least as to the possibilities, the scope and depth of the builder-vendor's potential
liability.
Between New Jersey's Atlantic-side beaches and the Big
Sur of California's Pacific-side a continent is spanned. And the
continent-spanning proportions and interrelationships of Schipper and Kriegler v. Eichler Homes, Inc.,"9 decided by an intermediate California appellate court in 1969, deserve special mention. However, before undertaking such discussion it should be
borne in mind that Kriegler is nowhere mentioned nor referred
to in Wawak. Speculating on the reason for the lack of mention
or reference could make interesting reading.6 0 But whatever
the reason, the omission is a matter of serious import owing to
the seventeen and one-half years which elapsed between the
commencement of construction of the house in Kriegler and the
date on which the Supreme Court of California denied appellant
Eichler's petition for a hearing. More will be said about this
the dissent of Justice Waesche, for an illuminating discussion of New
Jersey law prior to Schipper.
58. Wawak v. Stewart, 247 Ark. 1093, 1094, 449 S.W.2d 922, 923
(1970).

59. Kriegler v. Eichler Homes, Inc., 74 Cal. Rptr. 749 (1969).


60. It is possible, of course, that the report of Kriegler was not
discovered in the research done by the attorneys for the several parties
to Wawak, nor by those who submitted briefs amici curiae, nor by
the clerks for the trial and appellate court judges. It is likewise possible, but less likely, that it was discovered and not mentioned nor
referred to for the reason that the court in Kriegler was an intermediate appellate court and not the court of last resort in California. It
is also possible that it was discovered and rejected for the reason that
the discoverer did not know what to do with it-because, like the terrible two-edged sword, it cuts both ways.

1970]

CAVEAT EMPTOR OR CAVEAT VENDITOR

261

feature of the case in connection with the analysis of Wawak


supra.
Returning to the discussion of Schipper and Kriegler, the
New Jersey Court in Schipper evidenced much interest in and
placed much reliance upon the California Supreme Court's opinion in Greenman v. Yuba Power Products, Inc.,61 a case in
which strict liability in tort was applied to a property damage fact
situation very closely resembling Santor v. A and M Karagheusian, Inc.62 In turn, the Kriegler opinion leans heavily on Schipper to support its holding for the first time in the history of
California law that a builder-vendor of tract houses in California becomes liable to a purchaser of one of his houses, even
though purchased from a previous purchaser, for a property
damage resulting from a failure or defect occurring many years
after the house was built and sold. The court imposed the doctrine of strict liability upon the builder-vendor and equated the
position of the tract builder with the manufacturer of automobiles and other mass produced products. The holding seems limited, both by the facts and by the language, to builders of tract
houses, thus suggesting that the California Court might distinguish such a builder from the casual Wawak kind of builder.
The other very interesting aspects of the case are, of course, the
extension of protection to a remote purchaser and the length of
time which passed between commencement of construction and
final judgment.
Let us turn now to a deeper and harder look at Wawak.
V
...and then there were eight...
It is significant that the majority of the Arkansas Court went
through the somewhat less agonizing process of affirming a
lower court decision in bringing Arkansas to the forefront along
with the seven6 3 other states which have applied the modern
61.

59 Cal. 2d 57, 27 Cal. Rptr. 697, 377 P.2d 897 (1962).

62. 44 N.J. 52, 207 A.2d 305 (1965). The opinion in this case was
delivered on precisely the same day as was the opinion in Schipper.
63. Caveat venditor in the sale of a new house encompasses a
broad area of varying theories of liability. Cases from the other
seven jurisdictions which have held a builder-vendor liable on a theory

of implied warranty are: Schipper v. Levitt & Sons, Inc., 44 N.J. 70, 207

A.2d 314 (1965); Kriegler v. Eichler Homes, Inc., 74 Cal. Rptr. 749

(1969); House v. Thornton, - Wash. -, 457 P.2d 199 (1969); Carpenter v.


Donohoe, 154 Colo. 78, 388 P.2d 399 (1964); Bethlahmy v. Bechtel, 91
Idaho 55, 415 P.2d 698 (1966); Waggoner v. Midwestern Development

ARKANSAS LAW REVIEW

[Vol. 24: 245

law of caveat venditor to the construction and sale of a new


house. While awaiting the possibility of this decision's triggering
a house builder's backlash, which may be echoed in the legislature, it is refreshing to rejoice in the majority opinion's boldness
and bask in the warmth of its reasoning. Wawak rejected a
twisted and outmoded concept and abandoned a rule which,
with the passage of time and change in technology, had become
relatively reasonless in an effort to achieve substantial justice
for the once beleaguered home buyer.
This giant step for the state of Arkansas seemed too bold
for the minority, which manifested a feeling that the legislature
is the proper place for so sweeping a change of this magnitude.
In the old comedy tradition of Alphonse and Gaston, courts and
legislatures have participated in this Mexican-standoff type of
impasse for years, each reluctant, for different reasons, to venture beyond the state of outmoded English law without the
comforting cushion of almost total acceptance of the changed
doctrine elsewhere. While we applaud the majority for its forthright step into the 20th Century, we also feel compelled to reckon
with the dissent, as the question of legislation has been raised in
other decisions involving changes from the rule of caveat emptor
and probably will be raised again and again.
The modern rule, resulting in such an abrupt change from
the concept of caveat emptor as applied to the construction and
sale of a new house, is a fit subject for legislative action. Its
application raises so many problems that it would seem only a
comprehensive statute could anticipate them all. And yet we
seem to condone by our praise the Arkansas Court's usurpation
of legislative prerogative. We may dispose of this seeming paradox and question the reasoning of the dissent's opinion by a discussion of the realities.
In a legal journal published barely two years ago, 64 Dr.
Robert A. Leflar, Distinguished Professor of Law at the University of Arkansas, wrote an article concerning a jurisdiction accepting comparative negligence via a court decision in the face
Co., - S.D. -, 154 N.W.2d 803 (1967); Humber v. Morton, 426 S.W.2d
554 (Tex. 1968). See also, Comment, Extension of Strict Liability To
The Construction and Sale of Buildings in Oregon, 48 ORE. L. REv. 411
(1969), where other cases are noted, some finding liability on other theories but in dicta recognizing an implied warranty, and other cases
finding caveat venditor on a variety of theories.
64. Leflar, Comments on Maki v. Frelk-Comparativev. Contributory Negligence: Should the Court or Legislature Decide?, 21 VAND.
L. REv. 889, 918 (1968).

1970]

CAVEAT EMPTOR OR CAVEAT VENDITOR

263

of legislative indifference, even hostility. The same reasoning


may be applied to any court made rule that was once considered
the domain of the legislature. Dr. Leflar pointed out that,
[T]he explanation probably lies in the nature of the legislatures
and legislative action. Comparative negligence [implied warranty] involves a type of social progress to which no potent social action group is politically committed ....

Legislatures are

seldom alert to social needs that are not backed up by political


pressures. Social needs with no potent lobby behind them, particularly if there is an active lobby against them, ordinarily do
not receive much favorable attention in state legislatures. They
are the sort of things that courts have to take care of....
They know about these problems and, if the judges are forwardlooking and intellectually5 alive, they know something of what
the answers should be.6

W. Barton Leach has stated the point well in a thoughtful


and thought-provoking treatise66 by writing:
[I]t is very soothing and involves little effort for a modern
judge to fold his hands over his paunch, put on a starched
smile, and refrain from doing any thinking on the applicability
of an "established" rule to modern conditions. But this will no
longer do. If the law is to retain its vitality, the judges must
revitalize it.67

Leach then turns to Chief Justice Arthur T. Vanderbilt of the


Supreme Court of New Jersey and quotes a portion of a minority
opinion eloquently written by the Chief Justice as follows:
To hold, as the majority opinion implies, that the only way to
overcome the unfortunate rule of law that plagues us here
is by legislation, is to put the common law in a self-imposed
strait-jacket. Such a theory, if followed consistently, would inevitably lead to the ultimate codification of all of our law for
sheer lack of capacity in the courts to adapt the law to the
needs of the living present. The doctrine of stare decisis
neither renders the courts impotent to correct their past errors
nor requires them to adhere blindly to rules that have lost
their reasons for being. The common law would be sapped
of its life blood if stare decisis were to become a god instead
of a guide. The doctrine when properly applied operates only
to control change, not to prevent it .... 68
With the modern trend toward greater consumer protection
in its infancy, and Naderism 69 only a slow moving force yet to
gain enough momentum to carry it across the nation, a large
65. Id. at 928 (emphasis added).
66. W. LEACH, PROPERTY LAW INDICTED!

OR THE PEOPLE VS. BLACKSTONE, KENT, GRAY, AND STARE DECISION (ACCESSORIES: PONTIUS PILATE
AND THE LAWS OF THE MEDES AND THE PERSIANS) (1967).

67.
68.

Id. at 25.
W. LEACH, supra note 66, at 26-27, quoting from Fox v. Snow,

6 N.J. 12, 76 A.2d 877 (1950).


69.

Named for Ralph Nader, consumer crusader in Washington, D.C.

ARKANSAS LAW REVIEW

[Vol. 24:245

lobby on the local scene has not yet materialized. The majority
of the Arkansas Court has, perhaps, become that lobby, prodding
the legislature to an abrupt awakening and, in the Court's words,
forcing the legislature to "focus legislative attention upon the
70
problem."
In the absence of any legislative action the Wawak case is a
weapon of vast and untried potential-somewhat like a timebomb of unknown strength hurled into the mass of interrelated
entities that are responsible for the failures of the house building
industry. Lest this modern weapon destroy the industry it is
meant only to police, its contents must be analyzed to fathom
its limitations. Its limitations are to be found in the words written into the majority opinion, each with its precise application
and potential for harm, arising in part from an inborn infirmity,
having been fashioned, shaped and molded through past judicial
decisions and legislative enactments.
Another look to other jurisdictions is in order to see what
limitations have been placed in their precedent making proclamations. In California the court applied the rule of strict liability
to a builder of tract houses. The New Jersey Court allowed a
lessee of the owner who had purchased from the original
builder to sustain an action. In the former case there was injury to the house itself. In the New Jersey case there was a
personal injury.
With these in mind, we begin gradual dissection of the
Wawak case. Our tools will be the following questions which,
by being asked and-to the extent presently possible-answered,
will lay that case open and bare so that we may see both its inner
and its inherent limitations: Who is liable? Just any builder?
To whom would he be liable? Who may sue? For what kind of
defects will the builder be liable? Will his liability be the same
for injury to property as injury to persons? To what persons
will he be liable if they are injured? For how long will
the builder be liable? For how long should he be liable? Some
of these answers are found in the case itself-and some must be
conjectured for possible legislative enactment.
Justice George Rose Smith stated:
The great question ... is whether there is any implied warranty
in a contract by which 7the builder-vendor of a new house sells
it to its first purchaser. 1
70.
(1970).
71.

Wawak v. Stewart, 247 Ark. 1093, 1100, 449 S.W.2d 922, 926
Id. at 1094, 449 S.W.2d at 923 (emphasis added).

1970]

CAVEAT EMPTOR OR CAVEAT VENDITOR

265

The "builder-vendor" terminology potentially amounts to a


very broad classification. It might encompass all builders-from
the lone carpenter who builds entirely through his own efforts
and subsequently sells, to the small contractor who builds custom-made houses through contracts with the individual home
buyers, to the large developer who sometimes builds whole towns
as if on a Detroit-like assembly line, sacrificing individualized
quality and care to efficiency and volume sales. The latter case
is the one for which modern rules of liability for a house builder
were most clearly fashioned. However, it is only a short and
logical step to the other builders. When the lone builder gives
way to the large developer, other problems arise. The large
tract developer has surpassed the abilities of the individual
builder. The large scale type of home construction involves commensurately large lending institutions with the concomitant intricacies of finance and bureaucratic entanglements of governmental control. It has brought together strange bedfellows that
have spawned odd combinations of contractors, sub-contractors,
lending institutions, and regulatory agencies. Each segment has
its own potential liability to the consumer in home construction.
A case that involved all of these, and in which the lending institution was held liable for the defects in construction, points up
the possible defendants that could be found liable in a defective
house building case. 72 This case is rather outside the scope of
this article and could provide the substance for a separate writing endeavor.
In the Wawak case there was no separate contract to build
between the builder-vendor and the buyer. Nor was the buildervendor a developer of large tracts. It could be disputed whether
he was even primarily in the business 73 of building homes for
sale. By his own testimony Wawak was a crane supervisor for
Southwestern Bell Telephone Co. However, Wawak and his
wife bought the property involved and built the house thereon
72. Connor v. Great Western Savings and Loan Ass'n., 73 Cal. 369,
447 P.2d 609 (1968); commented on in 44 N.Y.U. L. REv. 639 (1968); 35
U. Cm. L. REV. 739 (1968); 56 GEo. L.J. 788 (1968). See also 48 ORE L.
REv. 411, 420, n. 53 (1968). Totten v. Gruzen, 52 N.J. 202, 245 A.2d 1
(1968) stated that strict liability possibly could have been imposed upon
the architects and engineers if it had been pleaded.
73. Wawak in his pleading alleged that he was in the business of
building houses. In his testimony he stated he was a crane supervisor
for Southwestern Bell Telephone Co. Accent is placed on business for
possible strict interpretation under 402A of the RESTATEMENT (SECOND)
OF TORTS (1965).
This section is quoted in the text of the article
infra.

ARKANSAS LAW REVIEW

[Vol. 24:245

with the intention of selling it. He testified that he had built


two or three houses a year over the last twenty years. His qualifications for holding himself out to the public as a builder of
quality homes constructed in a workmanlike manner are unknown, as Arkansas presently has no means of controlling or
licensing housebuilders.7 4 Under the literal wording of the Wawak decision, any person who builds a house and sells it, is
liable to the purchaser on a theory of implied warranty.
The question then arises-what is the meaning of:
...whether there is any implied warranty in a contract by
which the builder-vendor of a new house sells it to its first
purchaser? 75

The majority of the Arkansas Court has, by its wording,


pigeonholed this suit as a contract action, analogous to the implied warranty in the sale of personalty, which is governed by
the law of sales in the Uniform Commercial Code.76 This pigeonholing prompted the dissent to take the majority to task for not
following other portions of the law of sales in failing to apply
77
the statutory defenses to this action.
Much confusion exists as to what doctrine to apply to the
construction and sale of a house. Since different sets of rules
apply to realty and personalty, many courts simply imply a warranty without taking into account that this is usually applied
to sales of personalty, which has its own peculiar rules. In a recent law review article 78 the author pointed out:
The term "warranty", generally associated with contract actions,
has tended to becloud the idea that the plaintiff's action and recovery are in tort, thus making the absence of a contract irrele74. H.B. No. 606, a bill providing for the establishment of a system

for licensing "homebuilders" formulated by the Arkansas Home


Builders Association, was presented to and rejected by the 1967 Regular
Session of the Arkansas General Assembly.
75. Wawak v. Stewart, 247 Ark. 1093, 1094, 449 S.W.2d 922, 923
(1970)

(emphasis added).

76.

ARK. STAT. ANN.

77.

The dissent in Wawak v. Stewart, 247 Ark. 1093, 1114, 449

S.W.2d

922, 933

(1970)

85-1-101 to 85-9-507 (Add. 1961).


said

".

. under the Uniform

Commercial

Code, Ark. Stat. Ann. 85-2-316 (3-a) (Add. 1961), even a blind purchaser of a shoe string could not recover upon an implied warranty of

fitness if he bought the shoe string under a contract stating that he was
not relying upon any warranties made by the seller."

78. Torts-The Strict Tort Liability of Builder-Vendors: State


Store Mfg. Co. v. Hodges, 189 So. 2d 113 (Miss. 1966), 28 Omo STATE L.J.
343 (1967). For expressions to the same effect, see, Wade, Strict Tort
Liability of Manufacturers,19 Sw. L.J. 5, 25 (1965); Prosser, The Fall of
the Citadel (Strict Liability to the Consumer), 50 MINN. L. REV. 791, 801,

802 (1966). See also Santor v. A and M Karagheusian, Inc., 44 N.J. 52,
207 A.2d 305 (1965).

1970]

CAVEAT EMPTOR OR CAVEAT VENDITOR

267

vant. Furthermore, "warranty" as a basis for strict liability became confused with the warranties of the law of sales, e.g., the
implied warranties of merchantibility and fitness. Such defenses as the failure of the purchaser to rely on seller's skill
and judgment, failure of purchaser to give notice of breach of
warranty to seller, and disclaimer of warranty liability, while
perfectly valid in sales actions, are not relevant to an action in
tort, where a manufacturer's liability is imposed by operation of
law, not by contract. Accordingly, numerous courts, . . . have
discarded the terminology of "warranty" and explicitly recognized that
a manufacturer's liability is grounded on strict liability
in tort. 79
We can only assume that the Arkansas Court meant to apply
the law of strict liability in tort even though it stated that the
action was in contract.8 0
The law of realty and the law of personalty have had separate development. Since the maxim of caveat emptor in the sale
of realty is to be discarded and a new law fashioned, the Court
is faced with a new field of endeavor. Should it attempt to apply existing law or hack its way through unmapped territory,
experimenting with new concepts? What presently existing law
would apply to the sale of realty? Trying to stretch the new
skin of modern problems over the old framework of solutions
might do the job, but it would leave many cracks and chinks.
The resulting thin-stretched reasonings and fictions eventually
snap-leaving the whole situation as a confused, tangled mass.
We need only look to decisions which the courts have announced
in applying the law of defamation to radio broadcasts, with one
court finally fashioning a new law, even giving it a new namedefamacast. The courts, gratefully, have fashioned a new law
as applied to realty. We might call this new law of realty"realtability." Realty + liability = "realtability." Could this
possibly be a new section in the RESTATEMENT OF PROPERTY?
To see how this new concept of realtability is formed we
look behind the two theories which have been applied to the
sales of realty. Parts of these two theories have been accepted,
others rejected. Since realty is unique, the two theories would
have to be accommodated to this uniqueness, necessitating deletion of inapplicable portions of the two theories.
The first theory that has been applied in the past is based on
the law of sales. This law governs transactions involving per79. Torts-The Strict Tort Liability of Builder-Vendors, supra note
78, at 344-45.

80. Wawak v. Stewart, 247 Ark. 1093, 1094, 449 S.W.2d 922, 926
(1970).

ARKANSAS LAW REVIEW

[Vol. 24:245

sonal property; the action is in contract, usually on an implied


warranty theory. Certain defenses have been formulated to
this action. The ordinary remedies in a contract action are
rescission and restitution. These have been applied in the past
in cases where there has been property damage only.
The second theory is a tort theory, a comparatively new approach in the RESTATEMENT (SECOND) OF TORTS 402A (1965).
This is strict products liability. As it has developed, there
are only certain situations in which it arises. The aforementioned section states:
(1) One who sells any product in a defective condition unreasonably dangerous to the user or consumer, or to his property, is
subject to liability for harm thereby caused to the ultimate user
or consumer, or to his property if: (a) The seller is engaged in
the business of selling such a product, and (b) it is expected to
and does reach the user or consumer without substantial change
in the condition in which it is sold.

Realtability, as pioneered by the Supreme Court of New


Jersey s ' and applied in the Wawak Case, is an amalgam of
these two theories, with the limitations of both eliminated and
their coverages broadened.
Recognizing both the need and novelty of applying realtability, it seems the action could sound in contract or tort; the
statutory defenses of sales law and contributory negligence in
the law of torts would be irrelevant, the seller being strictly liable for defects. The remedy of the buyer would be either
rescission and restitution or damages. It could be called an
implied warranty or strict liability in tort, but either, as far
as realtability is concerned, would mean the same thing-if a
house is constructed with a defect and that defect causes either
personal injury or property damage, the builder-vendor would
be liable.
Even though there would be no formal defenses, there would
have to be a quantum of harm beyond some specified minimum
before relief would be granted. There is as yet no standard by
which such harm would be measured. The law would develop
on a case by case basis until legislation is enacted. The jury, at
present, is the sole arbiter of this. One can only surmise with respect to the end result.
The question remains as to whom the builder-vendor would
be liable-invitees, permitees, lessees or owners who might be
three or four transactions removed from the builder-vendor
81.

See notes 57 and 58 and text of article relating thereto.

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CAVEAT EMPTOR OR CAVEAT VENDITOR

269

within the space of a few years. It would seem logical to extend


liability to invitees, permitees, or lessees if they are injured
within the time limit in which the structure is still considered a
new house. Also, any owner in a chain of transactions could sue,
no matter how many there might be, if he were still within the
same time period. Again we have a jury standard that ought
to be established by a legislative enactment.
The legislature can follow the majority of the courts' lead
on an entirely new law as applied to realty, or it can revert
back to already fashioned, but not entirely applicable, existing
law. We must await a legislative decision.
For what defects is the builder-vendor to be held liable?
The defects in the Wawak case were caused by an improperly
functioning air-conditioning and heating system which had been
installed by a sub-contractor. Water and particles of fill, known
as donnafill,8 2 were blown into the house through the ducts of the
air-conditioning and heating system. This caused, among other
damage, expenditures for painting the interior of the house, cleaning a rug, furniture and the duct system and replacing lamp
shades and draperies. It is apparent that this could be considered a rather serious defect. We need only to reconsider the
other cases that have adopted the modern rule of caveat venditor
in a sale of a house to see what types of defects have been con83
sidered serious enough to allow the claimant to recover.
As we have seen, the builder-vendor is liable even though he
entrusted the installation of the air-conditioning and heating
system to a sub-contractor. It was decided that the buildervendor should be liable because he is responsible for the final
completed product and consequently has the duty of seeing that
it is built in a workmanlike manner. This is known in tort law

82. Donnafill is a chalk-like substance, created as a by-product in


the manufacture of pelletized roofing material, frequently used for fill
under slab foundations in the Little Rock area.
83. Schipper v. Levitt & Sons, Inc., 44 N.J. 70, 207 A.2d 314 (1965)
(missing water system mixing valve caused serious scalding of infant);
Kriegler v. Eichler Homes, Inc., 74 Cal. Rptr. 749 (1969) (radiant heating pipes in floor corroded and disintegrated); House v. Thornton, Wash. -, 457 P.2d 199 (1969) (basement, walls, floors, foundation
slipped and cracked); Carpenter v. Donohoe, 154 Colo. 78, 388 P.2d 399
(1964)

(walls cracked); Bethlahmy v. Bechtel, 91 Idaho 55, 415 P.2d 698

(1966) (water flooded across tiled floors of basement rooms to extent that
furniture had to be placed upon bricks); Waggoner v. Midwestern Development Co., 83 S.D. 57, 154 N.W.2d 803 (1967) (water seeped into
basement); Humber v. Morton, 426 S.W.2d 554 (Tex. 1968) (defective
chimney caused house to catch on fire).

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as allocation of risk.8 4 The builder-vendor is a better risk-bearer


than the sub-contractor. It also puts on his shoulders the final
responsibility of seeing that the house is properly constructed.
The specter of the myriad defects that could possibly occur
in a house conjures up a house builder's nightmare of almost infinite proportions. It would be left to the discretion of the court
and the vagaries of a jury to decide which defects, and the proportions thereof, for which a claimant would be allowed compensation. This is another gap that the legislature must fill, or
leave house builders to the mercy of a sympathetic, home buying

jury.
VI
of time and the builder . . .
We might graphically demonstrate the cacophony of insistent questions that must be reverberating through the minds of
house builders and their insurers as they view the decision in the
Wawak case and the several decisions which preceded it. As
the figures fairly leap from the page and almost cry out for
some sort of reasonable standard, we can only imagine the
troubled countenances of those who are finally found liable
after these lengths of times:
WAWAK TIMETABLE
June, 1963
House built by Wawak with heating
to
and air-conditioning system installed
Oct., 1963
by Plummer Heating and Air Conditioning Co.
July, 1964
Offer-and-acceptance by CMC Realty
Co. to Stewarts
Aug., 1964
House sold to Stewarts by warranty
deed for $28,500
53

Mar., 1965

Water and fill particles began seeping


into ductwork and blown into house

July, 1966

Letter sent by plaintiff's attorney


threatening to sue
Trial Court decision by Circuit Court
Judge Warren Wood

years

July, 1968
Feb. 2, 1969

Supreme Court of Arkansas decision


finding builder-vendor liable

Mar. 9, 1969

Rehearing denied by Supreme Court


of Arkansas

84. See Calabresi, Some Thoughts on Risk Distribution and The


Law of Torts, 70 YALE L.J. 499 (1961).

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CAVEAT EMPTOR OR CAVEAT VENDITOR

271

While we might blanch at the Wawak timetable, the long time


lapse in Kriegler v. Eichler Homes, Inc., 5 is even more staggering.

17

years

KRIEGLER TIMETABLE
Fall, 1951
House constructed by defendant
Jan., 1952
Resings purchased home from defendant
Apr., 1957
Plaintiff purchased home from Resings
Nov., 1959
Heating system failed,
Apr., 1966
Judgment entered by trial court for
plaintiff
Jan., 1969
Feb., 1969

Court of appeal decision


Petition for rehearing denied

Mar., 1969

Hearing in Supreme Court denied

Seventeen and one-half years passed between the commencement


of construction and the finality of the decision finding the
builder-vendor liable for defects in a house he constructed and
sold.
The Schipper case has much the same timetable as the
Wawak case.
SCHIPPER TIMETABLE
Nov., 1958
1958
5

years

July, 1960
Aug., 1960
Feb., 1965

Defendant constructed a house


Kreitzer purchased from defendant
and moved in
Shipper leased home from Kreitzer
and moved in
Infant Schipper scalded
Supreme Court of New Jersey opinion
delivered

The majority opinion in Wawak was not directly concerned


with the time factor.86 It was concerned with the fact that many
85. Kriegler v. Eichler Homes, Inc., 74 Cal. Rptr. 749 (1969).
86. Approximately four years elapsed between the date of the
offer-and-acceptance agreement and the date of the decision by the trial
court, and approximately three and one-quarter years passed between
the date on which water and particles of fill began seeping into the
ducts and were blown into the house and the date of such decision.
Thus, the action was brought well within the five year period of limitation provided for in ARx. STAT. ANN. 37-209 (Repl. 1962), the relevant
statute relating to actions upon written instruments, whether the running
of the statute is computed from the date of the contract or the date on

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housing defects, ranging from damage to the house itself to the


suffering of serious injuries, were going unremedied.
These recent decisions were made in the absence of legislative action. The passage of such long periods of time from the
commencement of the construction of the house to the final adjudication of liability is, by itself, enough to cause house builder
groups literally to pounce on the legislature with a demand for
corrective measures. The majority of the Arkansas Court had
this in mind when they said:
...a judicial decision may focus legislative attention upon the
problem. See, for example, Act 165 of 1969, which was a prompt
legislative reaction to our decision in Parish v. Pitts, 244 Ark.
1239, 429 S.W.2d 45 (1968).87
WHAT SHOULD THE LEGISLATURE DO?
The legislature should act to fill in the gaps that necessarily

remain unfilled in a court decision. 88 We might first look to what


has been done elsewhere. In a recent article in the Cornell Law
Quarterly8 9 it was stated that "The National House-Builders Registration Council in England has provided for a system of inspections to counter the problem of shoddy construction. Increasingly, it has been suggested that 'no outside inspection was
needed provided the builder was compelled to give proper form
which the damage is first discovered. The determination of the date on
which the statute begins to run could, of course, be of critical importance.
See Peterson v. Brown, 216 Ark. 709, 227 S.W.2d 142 (1950), a case
involving personal property and holding that the statutory period for
bringing an action on a warranty of soundness or quality is computed
from the date of the sale, when the purchase and sale is made pursuant to an oral contract, and not from the date when the damage results or the breach is discovered. Since this case involved an oral
contract, the relevant statute of limitation was the three year statute,
ARK.STAT. ANN. 37-206 (Repl. 1962).
87. Wawak v. Stewart, 247 Ark. 1093, 1100, 449 S.W.2d 922, 926
(1970).
88. Cf.Leflar, supra note 64, at 928-29. Dr. Leflar stated:
They (the courts] are not equipped to foresee and to fore-answer
all of the questions that might possibly arise, as well as a legislature theoretically is, but they can forsee more of them than
the ordinary legislator can. It is increasingly common today for
courts to render opinions as they did in an earlier common law
era, that is, to answer the principally litigated issue first, then
to give answers to incidental questions that are apt to arise thereafter. Admittedly these incidental answers are dicta only, but
they are substantially authoritative and serve useful purposes.
By employing such a technique, appellate courts can do a better
job than the legislatures usually have done ....
89. Roberts, The Case of the Unwary Home Buyer: The Housing
Merchant Did It, 52 CORNELL L.Q. 835 (1967).

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CAVEAT EMPTOR OR CAVEAT VENDITOR

273

of warranty and that adequate insurance was made against the


builder going bankrupt.' ",0 The suggestion of inspections might
be ideal in the abstract, but it is faulty in actual operation. 1
In the same article 92 the author pointed out what the New York
Law Review Commission was proposing. Such Commission distinguishes between the risks of a business bargain, governed by
sales law, and the risks of personal injury, governed by tort law.
The builder-vendor would be liable in tort for personal injuries,
and the implied warranties could be eliminated if the buyer of
a completed house would agree in writing to forego warranties
and if the writing spelled out carefully the warranties being
93
eliminated.
We would hope, however, that the Arkansas General Assembly will accept the majority opinion as a guideline and
fashion an entirely new law. In any event, whatever legislation
is enacted should be the combined product of the house builder's
and home buyer's efforts. If either of the two groups alone makes
the ultimate decision as to legislation, the result may be unfair to
the other group. This is well illustrated by the one year limitation period in the house builders proposed Act, 94 and the seventeen and one-half years of impending liability in a consumer
oriented court decision. The former is concededly too short; the
latter is grotesquely too long. The defects in many of the houses
that were found to be compensable by the courts would not have
been discovered within one year. Many of the causes that made
the defects apparent are seasonal, and one season might be milder
than the next, leaving the defect another year within which to
lie dormant before springing upon the unwary home buyer,
who generally has made the most important single purchase of
his life. On the other hand, too long a time might bring the
90. Id. at 868 n. 135.
91. Most inspections would be superficial and perfunctory and
probably would have failed to detect most, if not all, of the defects
that developed in the houses referred to in note 83, supra.
92. Roberts, supra note 89, at 866-67.
93. But cf. Haskell, The Case for an Implied Warranty in Sales of
Real Property,53 GEO. L.J. 633, 642 (1965). The writer observes:
That the buyer should obtain an express warranty for his protection assumes a degree of sophistication on the buyer's part
which frequently does not exist. It may be argued that every
buyer should retain an attorney, but it is not the practice to do
so in many communities, particularly in the case of the sale of
the development house.
94. H.B. No. 606 and Bearman, supra note 21. In addition to a licensing system for home builders, H.B. No. 606 proposed a one year
warranty on new houses. Bearman, in his article, suggested a model
statute which provides for a one year warranty period.

274

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house building industry to a grinding halt by making insurance


premiums and similar costs to home buyers prohibitively expensive. Since the types of defects are innumerable and their
causes just as diverse and infinite, one could imagine a statutory
scheme giving a different time limitation to different parts of
the house, or to different types of defects. Recognizing the
possible shortcomings in this procedure, we can agree with the
dissent that, as the majority opinion recognizes, a mandate has,
indeed, been given to the Arkansas legislature.
Perhaps, the General Assembly will tell us when a house becomes a home!