Thursday, May 13, 2004
S.C. to Decide Whether Waivers of Implied Warranty Bind Homebuyers
By KENNETH OFGANG , Staff Writer/Appellate Courts
The California Supreme Court yesterday agreed to decide whether waivers of the common law implied warranty of quality, set forth in home purchase contracts before the state’s current law on residential construction defects took effect last year, are enforceable.
Chief Justice Ronald M. George and Justices Joyce L. Kennard, Kathryn M. Werdegar, and Carlos Moreno voted at yesterday’s conference to review the Jan. 22 decision of Div. Seven of this district’s Court of Appeal in Hicks v. Superior Court (Kaufman and Broad Home Corporation), B167843.
A divided panel in the Court of Appeal upheld Los Angeles Superior Court Judge Charles W. McCoy’s ruling in favor of KB Home in a class action brought on behalf of home buyers throughout the state. McCoy ruled that a disclaimer of the warranty of quality is enforceable if set forth in conspicuous and understandable language.
The plaintiffs, who bought their homes in 1991, claim that the polypropoylene fiber additives—the most common brand name is Fibermesh—used by KB Home to control cracks that occur when concrete cures are inferior to the more-expensive welded wire mesh that was once commonly used in new home construction. The result, they say, is wider cracks that constitute “a serious design and construction defect,” contrary to the builder’s express and implied warranties.
The trial judge originally denied class certification as to all causes of action, but the Court of Appeal three years ago reversed as to the warranty claims, while affirming as to claims for strict liability and negligence.
On remand, McCoy granted summary adjudication as to the implied warranty claims, finding that disclaimers of implied warranty contained in the sellers’ standard sales documents were reasonably conspicuous and were not procedurally or substantively unconscionable.
Presiding Justice Dennis Perluss, writing for the Court of Appeal, agreed, rejecting the plaintiffs’ contention that the trial judge’s ruling was contrary to Pollard v. Saxe & Yolles Dev. Co. (1974) 12 Cal.3d 374.
Pollard extended the implied warranty of merchantability and fitness, previously recognized in connection with the sale of consumer goods and other personal property, to contracts for the construction and sale of housing. But nothing in that ruling precludes the warranty from being disclaimed, Perluss said.
“To the extent Pollard’s extension of the theory of implied warranties to the construction and sale of new housing was expressly intended for the protection of the individual home purchaser, rather than to advance general public interests...a knowing waiver of those implied warranties in the sale of a private residence should be effective,” the presiding justice wrote.
Perluss went on to say that the “rigorous standard” of the Song-Beverly Consumer Warranty Act, which limits the enforceability of waivers of the implied warranty, does not apply in connection with new home sales because the statute is limited by its own terms to transactions involving consumer goods. And even Song-Beverly permits a waiver of the implied warranty of merchantability, Perluss noted, if clearly expressed by an “as is” or “with all faults” provision.
In KB’s case, Perluss concluded, their was no unconscionability. He cited evidence that the buyers were given several days to review the documents before signing them; that they could have purchased comparably priced homes in the same areas from KB’s competitors if they did not like the terms; that KB gave them significant protections in the form of express warranties, including a 10-year warranty against serious structural defects and warranties of one year or longer against all other defects; and that KB would have been willing to negotiate different terms if asked.
Justice Fred Woods concurred in the opinion, but Justice Earl Johnson Jr. dissented.
The “question we should be asking,” he wrote, “...is whether a builder-developer, who chooses to substitute a cheaper but supposedly better reinforcement product for one traditionally used, should, as a matter of public policy, be allowed to shift responsibility for rectification onto the buyer when the substitute product turns out to be defective.”
The answer, he said, ought to be that “the same public policy considerations which preclude the waiver of the implied warranty of merchantability as to consumer goods—unequal bargaining power, unequal knowledge, and the buyer’s necessary reliance on the seller’s skill and judgment—preclude the waiver of the implied warranty of merchantability as to new housing.”
Copyright 2004, Metropolitan News Company